-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R1gGs/WmFtbEPWNkDzGwdQBSz2EMoeEI27uH6vuS3/K2701O5/r0vQOJNuiGXQgF ASrR+IotMcsFeVJ2B1tVyQ== /in/edgar/work/0000932440-00-000368/0000932440-00-000368.txt : 20001109 0000932440-00-000368.hdr.sgml : 20001109 ACCESSION NUMBER: 0000932440-00-000368 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UCAR INTERNATIONAL INC CENTRAL INDEX KEY: 0000931148 STANDARD INDUSTRIAL CLASSIFICATION: [3620 ] IRS NUMBER: 061385548 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13888 FILM NUMBER: 756026 BUSINESS ADDRESS: STREET 1: 3102 WEST END AVENUE SUITE 1100 STREET 2: J-4 CITY: NASHVILLE STATE: TX ZIP: 37203 BUSINESS PHONE: 6157068227 MAIL ADDRESS: STREET 1: 3102 WEST END AVENUE SUITE 1100 STREET 2: J-4 CITY: NASHVILLE STATE: TN ZIP: 37203 10-Q 1 0001.txt REPORT FOR QUARTERLY PERIOD ENDING 9/30/2000 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 10-Q --------------- (MARK ONE) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO ______________ --------------- COMMISSION FILE NUMBER: 1-13888 --------------- UCAR INTERNATIONAL INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 06-1385548 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) --------------- 3102 WEST END AVENUE SUITE 1100 37203 NASHVILLE, TENNESSEE (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 760-8227 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of September 30, 2000, 45,159,162 shares of common stock, par value $.01 per share, were outstanding. ================================================================================ TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION: ITEM 1. FINANCIAL STATEMENTS: Consolidated Balance Sheets as of December 31, 1999 And September 30, 2000.................................................................... Page 3 Consolidated Statements of Operations for the Three Months ended September 30, 1999 and 2000 and for the Nine Months ended September 30, 1999 and 2000......................................................... Page 4 Consolidated Statements of Cash Flows for the Nine Months ended September 30, 1999 and 2000......................................................... Page 5 Consolidated Statement of Stockholders' Equity (Deficit) for the Nine Months ended September 30, 2000...................................................... Page 7 Notes to Consolidated Financial Statements.................................................. Page 8 INTRODUCTION TO PART I, ITEM 2, AND PART II, ITEM 1............................................. Page 22 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............................................................. Page 27 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.............................. Page 43 PART II. OTHER INFORMATION: ITEM 1. LEGAL PROCEEDINGS...................................................................... Page 45 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.............................................. Page 51 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................................... Page 51 SIGNATURE............................................................................................ Page 52 INDEX TO EXHIBITS.................................................................................... Page E-1
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS UCAR INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) (UNAUDITED)
DECEMBER 31, SEPTEMBER 30, ASSETS 1999 2000 ------------ ------------- CURRENT ASSETS: Cash and cash equivalents........................................................ $ 17 $ 11 Short-term investments........................................................... 3 - Notes and accounts receivable.................................................... 171 126 Inventories: Raw materials and supplies.................................................... 49 47 Work in process............................................................... 113 113 Finished goods................................................................ 42 35 ------- ------- 204 195 Prepaid expenses and deferred income taxes....................................... 25 33 ------- ------- Total current assets................................................. 420 365 ------- ------- Property, plant and equipment........................................................ 1,071 1,013 Less: accumulated depreciation....................................................... 673 636 ------- ------- Net fixed assets..................................................... 398 377 Other assets......................................................................... 115 120 ------- ------- Total assets......................................................... $ 933 $ 862 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable................................................................. $ 80 $ 73 Short-term debt.................................................................. - 4 Payments due within one year on long-term debt................................... 82 22 Accrued income and other taxes................................................... 39 43 Other accrued liabilities........................................................ 114 119 ------- ------- Total current liabilities............................................ 315 261 ------- ------- Long-term debt....................................................................... 640 696 Other long-term obligations.......................................................... 224 187 Deferred income taxes................................................................ 33 18 Minority stockholders' equity in consolidated entities............................... 14 13 STOCKHOLDERS' EQUITY (DEFICIT): Preferred stock, par value $.01, 10,000,000 shares authorized, none issued....... - - Common stock, par value $.01, 100,000,000 shares authorized, 47,440,536 shares issued at December 31, 1999, 47,478,644 shares issued at September 30, 2000................................ - - Additional paid-in capital....................................................... 523 525 Accumulated other comprehensive income (loss).................................... (205) (234) Retained earnings (deficit)...................................................... (525) (519) Less: cost of common stock held in treasury, 2,338,038 shares at December 31, 1999, 2,319,482 shares at September 30, 2000 (86) (85) ------- ------- Total stockholders' equity (deficit)................................. (293) (313) ------- ------- Total liabilities and stockholders' equity (deficit)................. $ 933 $ 862 ======= =======
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ------------------- ------------------- 1999 2000 1999 2000 ---- ---- ---- ---- Net sales............................................ $ 210 $ 192 $ 623 $ 586 Cost of sales........................................ 140 139 417 420 --------- --------- ---------- ---------- Gross profit.................................... 70 53 206 166 Research and development............................. 3 3 7 8 Selling, administrative and other expenses........... 20 20 65 67 Graphite and carbon restructuring charges (credits), net.......................... (6) (1) (6) 5 Securities class action and stockholder derivative lawsuits 13 - 13 (1) Other (income) expense (net)......................... (1) - (7) (1) ----------- --------- ---------- ---------- Operating profit................................ 41 31 134 88 Interest expense..................................... 20 18 64 57 ---------- --------- ---------- ---------- Income before provision for income taxes........ 21 13 70 31 Provision for income taxes........................... - 5 13 9 ----------- --------- ---------- ---------- Income of consolidated entities............... 21 8 57 22 Less: Minority stockholders' share of income......... - 1 2 2 ----------- --------- ---------- ---------- Income before extraordinary item.............. 21 7 55 20 Extraordinary item, net of tax....................... - - - 13 ----------- --------- ---------- ---------- Net income...................................... $ 21 $ 7 $ 55 $ 7 ========== ========= ========== =========== BASIC EARNINGS PER COMMON SHARE: Income before extraordinary item................ $ 0.46 $ 0.16 $ 1.22 $ 0.44 Extraordinary item, net of tax.................. - - - (0.28) ---------- --------- ---------- ---------- Net income per share............................ $ 0.46 $ 0.16 $ 1.22 $ 0.16 ========== ========= ========== ========== Weighted average common shares outstanding (in thousands).................................. 45,087 45,152 45,120 45,135 ========== ========= ========== ========== DILUTED EARNINGS PER COMMON SHARE: Income before extraordinary item................ $ 0.45 $ 0.16 $ 1.18 $ 0.43 Extraordinary item, net of tax.................. - - - (0.28) ---------- --------- ---------- ------- - - - ---------- --------- ---------- Net income per share............................ $ 0.45 $ 0.16 $ 1.18 $ 0.15 ========== ========= ========== ========= Weighted average common and common equivalent shares outstanding (in thousands).... 46,747 45,813 46,585 45,910 =========== ========= ========== =========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN MILLIONS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, ------------------- CASH FLOW FROM OPERATING ACTIVITIES: 1999 2000 ---- ---- Net income ..................................................................... $ 55 $ 7 Extraordinary item, net of tax................................................... - 13 Non-cash charges to net income: Depreciation and amortization................................................. 34 32 Deferred income taxes......................................................... 2 (15) Graphite and carbon restructuring charges (credits), net...................... (6) 5 Securities class action and stockholder derivative lawsuits................... 13 - Other non-cash charges........................................................ 13 16 Working capital*................................................................. (45) (32) Long-term assets and liabilities................................................. (6) 14 ------- ------ NET CASH PROVIDED BY OPERATING ACTIVITIES................................. 60 40 ------- ------ CASH FLOW FROM INVESTING ACTIVITIES: Capital expenditures............................................................. (42) (35) Purchases of short-term investments.............................................. (20) - Maturity of short-term investments............................................... 25 2 Purchase of investment .......................................................... - (1) Sale of assets................................................................... 4 - ------- ------ NET CASH USED IN INVESTING ACTIVITIES..................................... (33) (34) ------- ------ CASH FLOW FROM FINANCING ACTIVITIES: Short-term debt borrowings (reductions), net..................................... (18) 4 Revolving credit facility borrowings, net........................................ - 59 Long-term debt borrowings........................................................ 108 657 Long-term debt reductions........................................................ (159) (705) Dividends paid to minority shareholder........................................... (1) - Financing costs.................................................................. - (26) ------- ------ NET CASH USED IN FINANCING ACTIVITIES..................................... (70) (11) ------- ------ Net increase (decrease) in cash and cash equivalents................................. (43) (5) Effect of exchange rate changes on cash and cash equivalents......................... (2) (1) Cash and cash equivalents at beginning of period..................................... 58 17 ------- ------ CASH AND CASH EQUIVALENTS AT END OF PERIOD........................................... $ 13 $ 11 ======= ======
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5 PAET I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D) (DOLLARS IN MILLIONS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, ------------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: 1999 2000 ----- ---- Net cash paid during the period for: Interest...................................................................... $ 64 $ 66 ======= ====== Income taxes.................................................................. 29 7 ======= ====== * Net change in working capital due to the following components: (Increase) decrease in current assets: Notes and accounts receivable................................................. $ 15 $ 11 Inventories................................................................... 14 (7) Prepaid expenses and other current assets..................................... 2 (1) Decrease in accounts payable and accruals........................................ (10) (12) Antitrust investigations and related lawsuits and claims......................... (46) (17) Restructuring payments........................................................... (20) (6) ------- ------ WORKING CAPITAL........................................................... $ (45) $ (32) ======= ======
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (DOLLARS IN MILLIONS) (UNAUDITED)
ACCUMULATED OTHER ADDITIONAL COMPREHENSIVE RETAINED TOTAL COMMON PAID-IN INCOME EARNINGS TREASURY STOCKHOLDERS' STOCK CAPITAL (LOSS) (DEFICIT) STOCK EQUITY (DEFICIT) ----- ------- ------ --------- ----- ---------------- BALANCE AT DECEMBER 31, 1999.............. $ - $ 523 $ (205) $ (525) $ (86) $ (293) Comprehensive income: Net income............................. - - - 7 - 7 Other comprehensive income: Unrealized loss on available-for-sale securities........................ - - (1) - - (1) Foreign currency translation adjustments - - (28) - - (28) ----- ------ ----- ------- ----- ------- Total comprehensive loss.................. - - (29) 7 - (22) Sale of common stock - stock options...... - 2 - - - 2 Sale of common stock - treasury stock..... - - - (1) 1 - ----- ------- -------- ------- ----- ----- BALANCE AT SEPTEMBER 30, 2000............. $ - $ 525 $ (234) $ (519) $ (85) $ (313) ===== ======= ========= ======== ===== =====
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7 PART I (CONT'D) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UCAR INTERNATIONAL INC. AND SUBSIDIARIES (1) INTERIM FINANCIAL PRESENTATION The interim Consolidated Financial Statements are unaudited; however, in the opinion of management, they have been prepared in accordance with Rule 10-01 of Regulation S-X adopted by the Securities and Exchange Commission and reflect all adjustments (all of which are of a normal, recurring nature) which are necessary for a fair presentation of financial position, results of operations and cash flows for the periods presented. Results of operations for the nine months ended September 30, 2000 are not necessarily indicative of the results of operations that may be expected for the entire year ending December 31, 2000. IMPORTANT TERMS We use the following terms to identify various companies or groups of companies, markets or other matters in the Consolidated Financial Statements. "UCAR" refers to UCAR International Inc. only. UCAR is our parent company and the issuer of the publicly traded common stock covered by the Consolidated Financial Statements. "UCAR Global" refers to UCAR Global Enterprises Inc. only. UCAR Global is a direct wholly owned subsidiary of UCAR and the direct or indirect holding company for all of our operating subsidiaries. UCAR Global was the issuer of our previously outstanding 12% senior subordinated notes due 2005 (the "Subordinated Notes") and was the primary borrower under our prior senior secured bank credit facilities (the "Prior Senior Facilities"). "UCAR Finance" refers to UCAR Finance Inc. only. UCAR Finance is a direct wholly owned special purpose finance subsidiary of UCAR and the borrower under our new senior secured credit facilities (the "New Senior Facilities"). "Subsidiaries" refers to those companies which, at the relevant time, were majority owned or wholly owned directly or indirectly by UCAR. All of UCAR's subsidiaries have been wholly owned (with de minimis exceptions in the case of certain foreign subsidiaries) from at least January 1, 1996 through September 30, 2000, except for: o our Russian subsidiary, which was acquired in late 1996 and early 1997 and has been wholly owned since then, o our German subsidiary, which was acquired in early 1997 and 70% owned until early 1999, when it became wholly owned in order to facilitate the cessation of its manufacturing operations, 8 PART I (CONT'D) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES (1) INTERIM FINANCIAL PRESENTATION (CONT'D) o Carbone Savoie S.A.S. ("Carbone Savoie"), which was acquired in early 1997 and has been 70% owned since then, and o our South African subsidiary, which was 50% owned until April 1997, when it became wholly owned. "We," "us," or "our" refers collectively to UCAR and its subsidiaries or, if the context so requires, UCAR, UCAR Global or UCAR Finance, individually. FOREIGN CURRENCY TRANSLATION Generally, except for operations in Russia where high inflation has existed, unrealized gains and losses resulting from translating assets and liabilities of foreign operations into U.S. dollars are accumulated in other comprehensive income (loss) on the Consolidated Balance Sheets until such time as the operations are sold or substantially or completely liquidated. Translation gains and losses relating to operations where high inflation has existed are included in other (income) expense (net) in the Consolidated Statements of Operations. Our Mexican subsidiary began using the U.S. dollar as its functional currency during 1999 because its sales and purchases are predominantly U.S. dollar-denominated. Prior to August 1, 2000, our Swiss subsidiary used the U.S. dollar as its functional currency. Beginning August 1, 2000 our Swiss subsidiary began using the euro as its functional currency because its operations became predominantly euro-denominated. OTHER ACCOUNTING MATTERS In 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") 133, "Accounting for Derivative Instruments and Hedging Activities," which requires that an entity recognize all derivative instruments as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS 133, as amended by SFAS 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," and SFAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of FASB Statement No. 133," is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. We are currently evaluating the impact of SFAS 133 on our financial position and results of operations in the period of adoption. In 1999, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial Statements," which summarizes the staff's views regarding the application of generally accepted accounting principles to selected revenue recognition issues. We are evaluating whether SAB 101 will require any change in our revenue recognition policies and procedures. 9 PART I (CONT'D) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES (2) EARNINGS PER SHARE Basic and diluted earnings per share are calculated using the following share data:
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ------------------- ------------------- 1999 2000 1999 2000 ---- ---- ---- ---- Weighted average common shares outstanding for basic calculation............... 45,086,939 45,152,472 45,120,494 45,135,299 Add: Effect of stock options........................ 1,659,962 660,179 1,464,221 774,833 ----------- ------------ ----------- ---------- Weighted average common shares outstanding, adjusted for diluted calculation... 46,746,901 45,812,651 46,584,715 45,910,132 ========== ========== ========== ==========
The calculation of weighted average common shares outstanding for the diluted calculation excludes the consideration of stock options covering 1,844,958 and 4,200,147 shares in each of the three months ended September 30, 1999 and 2000, respectively, and 1,940,256 and 3,449,723 shares in each of the nine months ended September 30, 1999 and 2000, respectively, because the exercise of these options would not have been dilutive for those periods. (3) SEGMENT REPORTING We have two reportable operating segments: graphite electrodes; and graphite and carbon products. The graphite electrode segment produces and markets graphite electrodes to electric arc furnace and ladle furnace steelmakers. The graphite and carbon products segment produces and markets carbon electrodes, natural, acid-treated and flexible graphite, graphite and carbon cathodes, and graphite and carbon specialties. These two segments are managed separately because of the different products and markets they serve. We evaluate the performance of our segments based on gross profit. Intersegment sales and transfers are not material. 10 PART I (CONT'D) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES (3) SEGMENT REPORTING (CONT'D) The following tables summarize financial information concerning our reportable segments.
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ------------------- ------------------- 1999 2000 1999 2000 ---- ---- ---- ---- (DOLLARS IN MILLIONS) Net sales to external customers: Graphite electrodes............................. $ 144 $ 132 $ 417 $ 398 Graphite and carbon products.................... 66 60 206 188 -------- -------- -------- ------- Consolidated net sales....................... $ 210 $ 192 $ 623 $ 586 ======= ======== ======= ====== Gross profit: Graphite electrodes............................. $ 51 $ 37 $ 149 $ 118 Graphite and carbon products.................... 19 16 57 48 ------- -------- ------- ------ Consolidated gross profit.................... $ 70 $ 53 $ 206 $ 166 ======= ========= ======= =======
(4) RESTRUCTURING CHARGES (CREDITS) In 2000 third quarter, we recorded a restructuring charge of $3 million in connection with the realignment of our U.S. cathode production to our facilities in Brazil and France and the reduction of graphite electrode production capability to accommodate such increased cathode production in Brazil and France. This was a non-cash charge related to the write-off of certain fixed assets located at one of our facilities in the U.S. In 2000 first quarter, we recorded a restructuring charge of $6 million in connection with a restructuring of our graphite specialties business. The key elements of the restructuring consist of elimination of certain product lines and rationalization of operations to reduce costs and improve profitability of remaining product lines. This rationalization included discontinuing certain manufacturing processes at one of our facilities in the U.S. that will be performed at our other facilities in the future. The charge included estimated severance costs for 65 employees, costs for demolition of selected buildings, and related environmental costs. During the nine months ended September 30, 2000, we paid $0.6 million in severance costs. In 2000 third quarter, management decided not to demolish those buildings. Therefore, we reversed $4 million of the charge that related to demolition and related environmental costs. 11 PART I (CONT'D) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES (4) RESTRUCTURING CHARGES (CREDITS) (CONT'D) In September 1998, we recorded a restructuring charge of $86 million in connection with a global restructuring and rationalization plan. The principal actions of the plan involved the closure of manufacturing operations at our facilities in Canada and Germany, and the centralization and consolidation of administrative and financial functions. These actions have eliminated 371 administrative and manufacturing positions through September 30, 2000. The following table summarizes activity relating to the accrued expense in connection with the restructuring charges.
ADJUSTMENTS AND CURRENCY BALANCE AT GRAPHITE AND EXCHANGE BALANCE AT DECEMBER 31, CARBON RATE SEPT. 30, 1999 RESTRUCTURING PAYMENTS CHANGES 2000 ------------ ------------- -------- ------- ---- (DOLLARS IN MILLIONS) Severance and related costs........ $ 13 $ 2 $ (4) $ (1) $ 10 Plant shut down and related costs.. 10 3 (1) (4) 8 Postmonitoring and environmental.................. 5 1 (1) - 5 ------- ----- ----- ------- --------- $ 28 $ 6 $ (6) $ (5) $ 23 ====== ===== ==== ======= =======
Cash payments of $6 million were made in the nine months ended September 30, 2000. The restructuring accrual is included in other accrued liabilities on the Consolidated Balance Sheets. (5) CONTINGENCIES ANTITRUST INVESTIGATIONS On June 5, 1997, we were served with subpoenas to produce documents to a grand jury convened by the U.S. Department of Justice (the "DOJ") and a related search warrant in connection with a criminal investigation as to whether there had been any violation of U.S. federal antitrust law by producers of graphite electrodes. Concurrently, the antitrust enforcement authority of the European Union (the "EU Competition Authority") visited the offices of one of our French subsidiaries for purposes of gathering information in connection with an investigation as to whether there had been any violation of the antitrust law of the European Community by those producers. In October 1997, we were served with subpoenas by the DOJ to produce documents relating to, among other things, our carbon electrode and bulk graphite businesses. 12 PART I (CONT'D) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES (5) CONTINGENCIES (CONT'D) In April 1998, pursuant to a plea agreement between the DOJ and UCAR, the DOJ charged UCAR and unnamed co-conspirators with participating from at least July 1992 until at least June 1997 in an international conspiracy involving meetings and conversations in the Far East, Europe and the U.S. resulting in agreements to fix prices and allocate market shares in the U.S. and elsewhere, to restrict co-conspirators' capacity and to restrict non-conspiring producers' access to manufacturing technology for graphite electrodes. On April 24, 1998, pursuant to the plea agreement, UCAR pled guilty to a one count charge of violating U.S. federal antitrust law in connection with the sale of graphite electrodes and was sentenced to pay a non-interest-bearing fine in the aggregate amount of $110 million (the "DOJ fine"). The DOJ fine is payable in six annual installments of $20 million, $15 million, $15 million, $18 million, $21 million and $21 million, commencing July 23, 1998. The agreement was approved by the court and, as a result, under the plea agreement, we will not be subject to prosecution by the DOJ with respect to any other violations of U.S. federal antitrust law occurring prior to April 1998. The payments due in 1998, 1999 and 2000 were timely made. In the 2000 first quarter, pursuant to a plea agreement with the DOJ, our former chief executive officer and chief operating officer, both of whom retired and resigned from all positions with us in March 1998, pled guilty to one count charges of violating U.S. federal antitrust law in connection with the sale of graphite electrodes and were sentenced to terms of incarceration and payment of fines. In January 2000, a former director of export sales was indicted by the DOJ on similar charges. We do not intend to reimburse those officers for their fines or that director of export sales for any costs or fines he may incur as a result of such indictment. In January 2000, Mitsubishi Corporation, a former parent of UCAR, was indicted by the DOJ on a one count charge of aiding and abetting violations of U.S. federal antitrust law in connection with the sale of graphite electrodes. In April 1998, the Canadian Competition Bureau (the "Competition Bureau") commenced a criminal investigation as to whether there had been any violation of Canadian antitrust law by producers of graphite electrodes. In March 1999, pursuant to a plea agreement with the Competition Bureau, our Canadian subsidiary pled guilty to a one count charge of violating Canadian antitrust law in connection with the sale of graphite electrodes and was sentenced to pay a fine of Cdn. $11 million. The plea agreement was approved by the court and, as a result, under the plea agreement, we will not be subject to prosecution by the Competition Bureau with respect to any other violations of Canadian antitrust law occurring prior to the date of the plea agreement. The fine was timely paid. 13 PART I (CONT'D) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES (5) CONTINGENCIES (CONT'D) In June 1998, we became aware that the Japanese antitrust enforcement authority had commenced an investigation as to whether there had been any violation of Japanese antitrust law by producers and distributors of graphite electrodes. In addition, in October 1999, we became aware that the Korean antitrust authority had commenced an investigation as to whether there had been a violation of Korean antitrust law by producers and distributors of graphite electrodes. We have no facilities or employees in Japan or Korea. We believe that, among other things, we have good defenses to any claim that we are subject to the jurisdiction of either such authority. In March 1999, the Japanese antitrust authority issued a warning letter to the four Japanese graphite electrode producers. While the Japanese antitrust authority did not issue a similar warning to us, the warning letter issued to the Japanese producers did reference us as a member of an alleged cartel. In January 2000, the EU Competition Authority issued a statement of objections initiating proceedings against various producers of graphite electrodes (including us). The statement alleges that the producers violated the antitrust law of the European Community and the European Economic Area in connection with the sale of graphite electrodes. The statement does not set forth any proposed fines or the impact which cooperation by us or other producers would have on the respective fines, if any. The maximum fine for such a violation is ten percent of a company's revenue during the year preceding the year in which the fine is assessed. We believe that we have provided substantial cooperation to the EU Competition Authority and are, therefore, entitled to a reduction in the amount of any fine which would otherwise be assessed. We believe that proceedings of this nature typically continue for about nine to twelve months before any fine is assessed. Any such assessment would be subject to appeal before the Court of First Instance in Luxembourg, although the fine or collateral security therefore would be payable about three months after such assessment. We are continuing to cooperate with the DOJ and the Competition Bureau in their continuing investigations of others and with the EU Competition Authority in its continuing investigation. In connection therewith, we have produced and are producing documents and witnesses. It is possible that antitrust investigations seeking, among other things, to impose fines and penalties could be initiated by authorities in other jurisdictions. The guilty pleas make it more difficult for us to defend against other investigations as well as civil lawsuits and claims. We have been vigorously protecting, and intend to continue to vigorously protect, our interests in connection with the investigations described above. We may, however, at any time settle any possible unresolved charges. 14 PART I (CONT'D) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES (5) CONTINGENCIES (CONT'D) ANTITRUST LAWSUITS In 1997, various producers of graphite electrodes (including us) were served with complaints commencing various antitrust class action lawsuits. Subsequently, the complaints were either withdrawn without prejudice to refile or consolidated into a single complaint (the "antitrust class action lawsuit"). In the consolidated complaint, the plaintiffs allege that the defendants violated U.S. federal antitrust law in connection with the sale of graphite electrodes and seek, among other things, an award of treble damages resulting from such alleged violations. In August 1998, the court certified a class of plaintiffs consisting of all persons who purchased graphite electrodes in the United States (the "class") directly from the defendants during the period from July 1, 1992 through June 30, 1997 (the "class period"). In 1998 and 1999, various producers of graphite electrodes (including us) were served with complaints and petitions by steelmakers in the U.S. and Canada commencing nine separate civil antitrust lawsuits (the "other initial lawsuits"). Such complaints and petitions allege that the defendants violated U.S. federal, Texas or Canadian antitrust laws or Canadian conspiracy law in connection with the sale of graphite electrodes. In 1999, various producers of graphite electrodes (including us) were served with two complaints commencing two separate civil antitrust lawsuits (the "foreign customer lawsuits"). The first complaint was filed by 26 steelmakers and related parties, all but one of whom are located outside the U.S., and the second complaint was filed by 4 steelmakers, all of whom are located outside the U.S. In each complaint, the plaintiffs allege that the defendants violated U.S. federal antitrust law in connection with the sale of graphite electrodes sold or sourced from the U.S. and those sold and sourced outside the U.S. The plaintiffs seek, among other things, an award of treble damages resulting from such alleged violations. We believe that we have strong defenses against claims alleging that purchases of graphite electrodes outside the U.S. are actionable under U.S. federal antitrust law. In 1999 and 2000, we were served with complaints commencing three civil antitrust lawsuits related to the sale of carbon electrodes (the "carbon electrode lawsuits"). Another producer of carbon electrodes is also a defendant in two of the carbon electrode lawsuits. In the complaints, the plaintiffs allege that the defendants violated U.S. federal antitrust law in connection with the sale of carbon electrodes and seek, among other things, an award of treble damages resulting from such alleged violations. The guilty pleas described above do not relate to carbon electrodes. 15 PART I (CONT'D) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES (5) CONTINGENCIES (CONT'D) Certain customers in other countries who purchased graphite electrodes, carbon electrodes or other products from us have threatened to commence civil antitrust lawsuits against us in the U.S. or in other jurisdictions with respect to the subject matter of the investigations and lawsuits described above. Through November 6, 2000, except as described in the next paragraph, we have settled all of the lawsuits described above, certain of the threatened civil antitrust lawsuits and certain possible civil antitrust claims by certain other customers who negotiated directly with us. The settlements cover virtually all of the actual and potential claims against us by customers in the U.S. and Canada arising out of alleged antitrust violations occurring prior to the date of the respective settlements in connection with the sale of graphite electrodes. Although each settlement is unique, in the aggregate they consist primarily of current and deferred cash payments with some product credits and discounts. All payments thereunder have been timely paid. Amounts due under the settlement of the antitrust class action will increase to the extent additional undisputed claims are filed by members of the class (which includes purchasers of graphite electrodes who are located outside the U.S. but who purchased graphite electrodes from our U.S. subsidiaries). The foreign customer lawsuits and the carbon electrode lawsuits have not been settled and are still in their early stages. We have been vigorously defending, and intend to continue to vigorously defend, against these lawsuits as well as all threatened lawsuits and possible unasserted claims, including those mentioned above. We may at any time, however, settle these lawsuits as well as any threatened lawsuits and possible claims. It is possible that additional civil antitrust lawsuits seeking, among other things, to recover damages could be commenced against us in the U.S. and in other jurisdictions. ANTITRUST EARNINGS CHARGE We recorded a charge of $340 million against results of operations for 1997 as a reserve for potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. The $340 million is calculated on a basis net of, among other things, imputed interest on installment payments of the DOJ fine. Actual aggregate liabilities and expenses could be materially higher than $340 million. To the extent that aggregate liabilities and expenses, net, are known or reasonably estimable, at September 30, 2000, $340 million continues to represent our estimate of such liabilities and expenses. In the aggregate, the fines and settlements described above and related expenses, net, are within the amounts used by us to evaluate the $340 million charge. 16 PART I (CONT'D) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES (5) CONTINGENCIES (CONT'D) Through September 30, 2000, we have paid an aggregate of $226 million of fines and net settlement and expense payments and $12 million of imputed interest. At September 30, 2000, $114 million remains in the accrual and, based on information known to us at November 6, 2000, the aggregate amount of remaining committed payments for fines and settlements at September 30, 2000 was about $64 million. The aggregate amount of remaining committed payments for imputed interest at September 30, 2000 was about $8 million. About $26 million of the committed payments for fines and settlements are due on or before September 30, 2001. (6) NEW LONG-TERM DEBT On February 22, 2000, we completed a debt recapitalization. We obtained the New Senior Facilities and used the net proceeds to repay and terminate the Prior Senior Facilities, to redeem the Subordinated Notes at a redemption price of 104.5% of the principal amount redeemed, plus accrued interest, to repay certain other debt and to pay related expenses. The New Senior Facilities consist of: o A Tranche A Facility providing for initial term loans of $137 million and of [Euro] 161 million (equivalent to $158 million at February 22, 2000) to UCAR Finance. The Tranche A Facility amortizes in quarterly installments over six years, commencing June 30, 2000, with installments ranging from [Euro] 2 million in 2000 to [Euro] 17 million in 2005, with the final installment payable on December 31, 2005. o A Tranche B Facility providing for initial term loans of $350 million to UCAR Finance. The Tranche B Facility amortizes over eight years, commencing June 30, 2000, with nominal quarterly installments during the first six years, and quarterly installments of $41 million in 2006 and 2007, with the final installment payable on December 31, 2007. o A Revolving Facility providing for U.S. dollar and euro-denominated revolving and swingline loans to, and the issuance of U.S. dollar-denominated letters of credit for the account of, UCAR Finance and certain other subsidiaries in an aggregate principal and stated amount at any time not to exceed $250 million (or the equivalent in euros at the time of borrowing). The Revolving Facility terminates on February 22, 2006. As a condition to each borrowing under the Revolving Facility, we are required to represent, among other things, that the 17 PART I (CONT'D) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES (6) NEW LONG-TERM DEBT (CONT'D) aggregate amount of payments (excluding certain imputed interest) and additional reserves created in connection with antitrust, securities and stockholder derivative investigations, lawsuits and claims do not exceed $340 million by more than $130 million (which $130 million is reduced by the amount of certain debt incurred by us that is not incurred under the New Senior Facilities). We are required to make mandatory prepayments in the amount of: o Either 75% or 50% (depending on our ratio of adjusted net debt to adjusted total EBITDA) of adjusted excess cash flow. The obligation to make these prepayments, if any, arises after the end of each year with respect to adjusted excess cash flow during the prior year. o 100% of the net proceeds of certain asset sales or certain debt incurrences. o 50% of the net proceeds of certain equity securities issuances by UCAR. We may make voluntary prepayments under the New Senior Facilities. There is no penalty or premium due in connection with prepayments (whether voluntary or mandatory). UCAR Finance makes intercompany loans of the net proceeds of borrowings under the New Senior Facilities to UCAR Global's subsidiaries. UCAR, UCAR Global and each of UCAR Global's subsidiaries have guaranteed, with certain exceptions, the obligations of UCAR Global's subsidiaries under the intercompany loans, except that our U.S. subsidiaries have not guaranteed obligations of our foreign subsidiaries under the intercompany loans. The obligations of UCAR Global's subsidiaries under the intercompany loans as well as these guarantees are secured, with certain exceptions, by first priority security interests in substantially all of our assets, except that no more than 65% of the capital stock or other equity interests in our foreign subsidiaries held directly by our U.S. subsidiaries and no other foreign assets secure obligations or guarantees of our U.S. subsidiaries. The obligations of UCAR Finance under the New Senior Facilities are secured, with certain exceptions, by first priority security interests in all of these intercompany loans (including the related security interests and guarantees). UCAR has unconditionally and irrevocably guaranteed the obligations of UCAR Finance under the New Senior Facilities. This guarantee is secured, with certain exceptions, by first priority security interests in all of the outstanding capital stock of UCAR Global and UCAR Finance and all of the intercompany debt owed to UCAR. 18 PART I (CONT'D) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES (6) NEW LONG-TERM DEBT (CONT'D) The interest rates applicable to the Tranche A and Revolving Facilities are, at our option, either Euro LIBOR plus a margin ranging from 1.00% to 2.75% (depending on our leverage ratio) or the alternate base rate plus a margin ranging from 0.00% to 1.75% (depending on our leverage ratio). The interest rate applicable to the Tranche B Facility is, at our option, either Euro LIBOR plus a margin ranging from 2.50% to 3.00% (depending on our leverage ratio) or the alternate base rate plus a margin ranging from 1.50% to 2.25% (depending on our leverage ratio). The alternate base rate is the higher of the prime rate announced by Morgan Guaranty Trust Company of New York or the federal funds effective rate plus 0.50%. UCAR Finance pays a per annum fee ranging from 0.375% to 0.500% (depending on our leverage ratio) on the undrawn portion of the commitments under the Revolving Facility. We enter into agreements with financial institutions which are intended to limit, or cap, our exposure to incurrence of additional interest expense due to increases in variable interest rates. Use of these agreements is allowed under the New Senior Facilities. The New Senior Facilities contain a number of covenants that, among other things, significantly restrict our ability to sell assets, incur additional debt, repay or refinance other debt or amend other debt instruments, create liens on assets, enter into sale and lease back transactions, make investments or acquisitions, engage in mergers or consolidations, make capital expenditures, make intercompany dividend payments to UCAR, pay intercompany debt owed to UCAR, engage in transactions with affiliates, pay dividends to stockholders of UCAR or make other restricted payments and that otherwise significantly restrict corporate activities. UCAR Global is, however, permitted to pay dividends to UCAR of up to $15 million for the purpose of making an investment in our subsidiary, Graftech Inc. (formerly known as UCAR Graph-Tech Inc.), and may also distribute the capital stock of Graftech Inc. to UCAR. In addition, UCAR may sell to third parties or distribute to UCAR's stockholders the capital stock of Graftech Inc. Further, we are permitted to pay dividends on, and repurchase, common stock in an aggregate amount of up to $25 million, plus up to an additional $25 million if certain leverage ratio and excess cash flow requirements are satisfied. We are also permitted to repurchase common stock from present or former directors, officers or employees in an aggregate amount of up to the lesser of $5 million per year (with unused amounts permitted to be carried forward) or $25 million on a cumulative basis since February 22, 2000. We are required to comply with specified minimum interest coverage and maximum leverage ratios, which become more restrictive over time, and limits on annual capital expenditures. In addition to the failure to pay principal, interest and fees when due, events of default under the New Senior Facilities include: failure to comply with covenants; failure to pay when due, or other defaults 19 PART I (CONT'D) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES permitting acceleration of, other indebtedness exceeding $7.5 million; judgment defaults in excess of $7.5 million to the extent not covered by insurance; certain events of bankruptcy; and certain changes in control. Aggregate payments (based on euro to U.S. dollar exchange rates at September 30, 2000) due on the Tranche A and B Facilities are: $8 million in 2000; $26 million in 2001; $61 million in 2002 and 2003; $65 million in 2004 and 2005; and $165 million in 2006 and 2007. In the 2000 third quarter, pursuant to our debt recapitalization in February 2000, our Italian subsidiary entered into a $15 million long-term debt arrangement with a third party lender. We also placed on deposit with the third party lender funds in the same amount which secure the debt. Since we have the legal right to set-off, and the intent to do so, such amounts have been netted and are not reflected separately in the Consolidated Balance Sheets. EXTRAORDINARY ITEM In February 2000, we recorded an extraordinary charge of $21 million ($13 million after tax) related to our debt recapitalization. The extraordinary charge includes $5 million of bank and third party fees and expenses, $9 million of redemption premium on the Subordinated Notes, and write-off of $7 million of deferred debt issuance costs. (7) FINANCIAL INSTRUMENTS Certain of our subsidiaries sold receivables totaling $84 million in the 2000 first nine months and $54 million in the 1999 first nine months. None of the receivables sold were recorded on the Consolidated Balance Sheets at September 30, 2000 and December 31, 1999. (8) LAWSUIT AGAINST FORMER PARENTS On February 23, 2000, we commenced a lawsuit against our former parents, Mitsubishi Corporation and Union Carbide Corporation. The other defendants are Mitsubishi International Corporation, a U.S. subsidiary of Mitsubishi Corporation, and two of the respective representatives of Mitsubishi Corporation and Union Carbide Corporation who served on UCAR's Board of Directors at the time of our leveraged equity recapitalization in January 1995. In the lawsuit, we allege, among other things, that certain payments made to our former parents in connection with the recapitalization were unlawful under the General Corporation Law of the State of Delaware, that our former parents were unjustly enriched by receipts from their investments in us and that our former parents aided and abetted breaches of fiduciary duties owed to us by our former senior management in connection with illegal graphite electrode price fixing activities. We are seeking to recover more than $1.5 billion in damages, including interest. We expect to incur $10 million to $20 million in legal expenses to pursue 20 PART I (CONT'D) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES this lawsuit through trial. Through September 30, 2000, we incurred $3 million of such legal expenses. (9) PUBLIC OFFERING OF COMMON STOCK OF GRAFTECH INC. On July 3, 2000, Graftech Inc. (formerly known as UCAR Graph-Tech Inc.), our wholly owned operating subsidiary engaged in the natural, acid-treated and flexible graphite business, filed a registration statement on Form S-1 with the Securities and Exchange Commission related to a proposed initial public offering of its common stock. A portion of the common stock to be sold was expected to consist of newly issued shares to be sold by Graftech Inc. and the balance was expected to consist of outstanding shares to be sold by our other subsidiary. Costs associated with the offering, including underwriting discounts, legal, accounting, printing and filing fees and incremental business realignment and separation costs, are expected to be paid from the gross proceeds of the offering. We will record a charge for costs incurred in connection with the offering if we do not proceed with the offering. On August 1, 2000, the registration statement filed by Graftech Inc. was declared effective. On August 3, 2000, we postponed the initial public offering due to market conditions. (10) SUBSEQUENT EVENT - AMENDMENT OF LONG-TERM DEBT On October 11, 2000, our New Senior Facilities were amended to, among other things, grant us a less restrictive maximum leverage ratio through June 30, 2001. In connection therewith, the maximum margin added to either euro LIBOR or the alternate base rate to determine the interest rates thereunder was increased by 0.25% and we paid an amendment fee of $2 million. 21 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES INTRODUCTION TO PART I, ITEM 2, AND PART II, ITEM 1 IMPORTANT TERMS We use the following terms to identify various companies or groups of companies, markets or other matters. These terms help to simplify the presentation of information in this Report. "UCAR" refers to UCAR International Inc. only. UCAR is our parent company and the issuer of the publicly traded common stock covered by this Report. "UCAR GLOBAL" refers to UCAR Global Enterprises Inc. only. UCAR Global is a direct, wholly owned subsidiary of UCAR and the direct or indirect holding company for all our operating subsidiaries. UCAR Global was the issuer of our previously outstanding 12% senior subordinated notes due 2005 (the "SUBORDINATED NOTES") and was the primary borrower under our prior senior secured bank credit facilities (the "PRIOR SENIOR FACILITIES"). "UCAR FINANCE" refers to UCAR Finance Inc. only. UCAR Finance is a direct wholly owned special purpose finance subsidiary of UCAR and the borrower under our new senior secured credit facilities (the "NEW SENIOR FACILITIES"). "GRAFTECH" refers to Graftech Inc. only. Graftech (formally know as UCAR Graph-Tech Inc.) is our wholly owned operating subsidiary engaged in the development, manufacture and sale of natural, acid-treated and flexible graphite. "CARBONE SAVOIE" refers to Carbone Savoie S.A.S. only. Carbone Savoie is a 70% owned subsidiary engaged, along with two of our wholly owned subsidiaries, in the development, manufacture and sale of graphite and carbon cathodes. "SUBSIDIARIES" refers to those companies which, at the relevant time, were majority owned or wholly owned directly or indirectly by UCAR or its predecessors to the extent that those predecessors' activities related to the graphite and carbon business. All of UCAR's subsidiaries have been wholly owned (with de minimis exceptions in the case of certain foreign subsidiaries) from at least January 1, 1996 through September 30, 2000, except for: o our Russian subsidiary, which was acquired in late 1996 and early 1997 and has been wholly owned since then, o our German subsidiary, which was acquired in early 1997 and 70% owned until early 1999, when it became wholly owned in order to facilitate the cessation of its manufacturing operations, o Carbone Savoie, which was acquired in early 1997 and has been 70% owned since then, and 22 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES o our South African subsidiary, which was 50% owned until April 1997, when it became wholly owned. "WE", "US" or "OUR" refers collectively to UCAR and its subsidiaries or, if the context so requires, UCAR, UCAR Global or UCAR Finance, individually. "HOME MARKETS" refer to North America, Western Europe, Brazil and South Africa. We have major manufacturing facilities located in each of these markets, and these are our largest markets. All other markets are called "EXPORT MARKETS." "FREE TRADING MARKETS" refers: o in the case of the graphite electrode, natural, acid-treated and flexible graphite and graphite specialties industries, the entire world, excluding China, and o in the case of the carbon electrode, graphite and carbon cathode and carbon specialties industries, the entire world, excluding China and the former Soviet Union. We sometimes use this term when describing markets for various products because information about excluded markets is believed to be unreliable or not readily available. We believe that China is generally a net importer of graphite electrodes. PRESENTATION OF FINANCIAL, MARKET AND LEGAL DATA We present our financial information on a consolidated basis. This means that we consolidate financial information for all subsidiaries where our ownership is greater than 50%. We use the equity method to account for 50% or less owned interests, and we do not restate financial information for periods prior to the acquisition of subsidiaries. This means that the financial information for our German subsidiary and Carbone Savoie is consolidated, since their acquisitions, on each line of the Consolidated Financial Statements and the equity of the other 30% owners (until early 1999, in the case of our German subsidiary) in those subsidiaries is reflected on the lines entitled "minority stockholders' equity in consolidated entities" and "minority stockholders' share of income." References to cost in the context of our low-cost producer strategy do not include: o the impact of special, non-recurring or unusual charges or credits such as those related to lawsuits and claims, restructurings, impairment losses or inventory write-downs, or o the impact of accounting changes or expenses incurred in connection with lawsuits initiated by us. 23 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES Unless otherwise noted, all cost savings and reductions are estimates based on a comparison to costs in 1998 or the 1998 fourth quarter (annualized) and on the assumption that net sales and other operating conditions are the same in 1999, 2000, 2001, 2002 and thereafter as they were in 1998. Neither any statements in this Report nor any charge taken by us relating to any legal proceedings constitute an admission as to any wrongdoing or liability. Nothing contained herein shall be deemed to constitute an offer to sell or solicitation of an offer to buy any securities. Market data relating to the steel industry has been derived from publications by the International Iron and Steel Institute and other industry sources as well as our own estimates. Market data relating to the fuel cell industry has been derived from publications by securities analysts relating to Ballard Power Systems Ltd. ("BALLARD"), other industry sources and public filings, press releases and other public documents of Ballard as well as our own estimates. Market and market share data relating to the graphite and carbon industry as well as cost information relating to our competitors has been derived from the sources described above and public filings, press releases and other public documents of our competitors as well as our own estimates. Although we believe that this data is reliable, we cannot guarantee the accuracy or completeness of this data and have not independently verified it. None of the sources mentioned above has consented to the disclosure or use of data in this Report. Unless otherwise noted, when we refer to dollars we mean U.S. dollars. Reference is made to UCAR's Annual Report on Form 10-K for the year ended December 31, 1999 (the "ANNUAL REPORT") for background information on various contingencies and other matters related to circumstances affecting us and our industry. FORWARD LOOKING STATEMENTS This Report contains forward looking statements. In addition, from time to time, we or our representatives have made or may make other forward looking statements orally or in writing. These include statements about such matters as: future production of steel in electric arc furnaces; future prices and sales of and demand for graphite electrodes and other products; future operational and financial performance of various businesses; strategic plans and programs; impacts of regional and global economic conditions; restructuring, strategic alliance, investment, acquisition, joint venture, operating, integration, tax planning, rationalization, financial and capital projects; legal matters and related costs; consulting fees and related projects; potential offerings, sales, restructurings and other actions regarding debt or equity securities of our subsidiaries; and future costs, cost savings and reductions, margins, earnings and growth. The words "will," "may," "plan," "estimate," "project," "believe," "anticipate," "intend," "expect," "could," "should," "would" and similar expressions identify some of these statements. 24 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES Actual future events and circumstances (including future performance, results and trends) could differ materially from those set forth in these statements due to various factors. These factors include: o the possibility that global or regional economic conditions may not improve for our products or may worsen, o the possibility that announced or anticipated additions to capacity for producing steel in electric arc furnaces or announced or anticipated reductions in graphite electrode manufacturing capacity may not occur, o the possibility that increased production of steel in electric arc furnaces or reductions in graphite electrode manufacturing capacity may not result in increased demand for, or price or volume stability or increases for, graphite electrodes, o the possibility that economic or technological development may adversely affect the growth in the use of graphite cathodes in lieu of carbon cathodes in the aluminum smelting process, o the occurrence of unanticipated events or circumstances relating to pending antitrust investigations, lawsuits or claims, o the commencement of new investigations, lawsuits or claims relating to the same subject matter as the pending investigations, lawsuits or claims, o the possibility that the lawsuit against our former parents initiated by us could be dismissed or settled, our theories of liabilities or damages could be rejected, material counterclaims could be asserted against us, legal expenses and distraction of management could be greater than anticipated, or unanticipated events or circumstances may occur, o the possibility of delays in or failure to achieve widespread commercialization of proton exchange membrane ("PEM") fuel cells which use flexible graphite-based flow field plates and the possibility that manufacturers of PEM fuel cells using those plates may obtain those plates or the flexible graphite used in them from other sources, o the possibility that we may not be able to protect our intellectual property or that intellectual property used by us infringes the rights of others, o the possibility of delays in or failure to achieve successful development and commercialization of new or improved products, the possibility of delays in meeting or failure to meet contractually specified development objectives and the possible 25 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES inability to find and successfully complete expansion of manufacturing capacity to meet growth in demand for new or improved products, if any, o the possibility that expected cost savings from our enhanced global restructuring and rationalization plan, our POWER OF ONE initiative, the restructuring of our graphite specialties business and other cost reduction efforts will not be fully realized, o the possibility that we may incur unanticipated health, safety or environmental compliance, remediation or other costs or experience unanticipated labor difficulties, o the occurrence of unanticipated events or circumstances relating to strategic plans or programs, including completion of financial alternatives to create more value for our stockholders from Graftech, or relating to restructuring, strategic alliance, investment, acquisition, joint venture, operating, capital, integration, tax planning, financial or rationalization projects, o changes in interest or currency exchange rates, changes in competitive conditions, changes in inflation affecting our raw material, energy or other costs, development by others of substitutes for some of our products and other technological developments, o the possibility that changes in financial performance may affect our compliance with financial covenants under the New Senior Facilities, and o other risks and uncertainties, including those described elsewhere or incorporated by reference in this Report or the Annual Report. No assurance can be given that any future strategic alliance, joint venture, investment or acquisition projects or any potential offering, sale or restructuring will be completed or as to the timing or terms of any such transaction. All subsequent written and oral forward looking statements by or attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. Except as otherwise required to be disclosed in periodic reports required to be filed by public companies with the SEC pursuant to the SEC's rules, we have no duty to update these statements. 26 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL We are the world's largest manufacturer of high quality graphite and carbon electrodes and cathodes as well as flexible graphite. We have a global business, selling our products in more than 80 countries and owning 15 manufacturing facilities located in Brazil, France, Italy, Mexico, Russia, Spain, South Africa, and the U.S. We operate in two business segments: graphite electrodes, which are our principal products; and graphite and carbon products, which include carbon electrodes, graphite and carbon cathodes, flexible graphite, and graphite and carbon specialties. Our graphite and carbon products business segment contributes about one-third of our net sales, and includes Graftech, our wholly owned operating subsidiary engaged in the development, manufacture and sale of natural and acid-treated as well as flexible graphite. Graphite electrodes are consumed primarily in the production of steel in electric arc furnaces, the steelmaking technology used by all "mini-mills." Mini-mills constitute the growth sector of the steel industry. Graphite electrodes are also used for refining steel in ladle furnaces and in other smelting processes. Carbon electrodes are used primarily in the production of silicon metal, which is used in the manufacture of aluminum. Cathodes are used as lining for furnaces that smelt aluminum. Flexible graphite is used in gasket and other sealing applications, as well as heat shielding applications, primarily for internal combustion engines, pipe flanges, and chemical and petrochemical industry process equipment. Our flexible graphite is a natural graphite based product, while most of our other products are petroleum coke-based products. We are developing applications for high quality, highly engineered natural, acid-treated and flexible graphite products and solutions for customers for applications in fuel cells, thermal management in computers and other electronic devices, fire protection in construction and building materials, energy management in devices such as batteries and supercapacitors, and heat management in high temperature use industrial furnaces. In addition to the steel and metals industries, we sell graphite and carbon products to the semiconductor, automotive, aerospace, chemical and transportation industries. We have the largest share of the free trading markets in all of our major product lines. Our strategic goal is to be the best global, low-cost manufacturer and customer service-driven company with the best product performance in the graphite and carbon industry. We believe that, in addition to our large market shares, our strengths include: o our global manufacturing base, which includes multiple, fully integrated, state of the art facilities in diverse geographic regions, o our successful global restructuring, reengineering, rationalization and integration projects and programs that have generated cost savings, improved operating efficiencies and reduced our cost structure for manufacturing graphite electrodes and cathodes, which we believe is currently the lowest among the major producers in the industry, 27 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES o our management team, o our exceptional customer service, o our diversified customer base, and o our technology and our product innovation and process improvement capabilities. To achieve our strategic goal, we are focusing significant efforts on further reducing costs, improving operating efficiencies and improving product quality and technical and commercial customer service. We are restructuring our carbon and graphite specialties business and implementing a global business transformation initiative entitled POWER OF ONE. We are pursuing strategic alliances and growth opportunities that enhance or complement our existing businesses. We are also focusing on developing new related products and expanding applications for our existing products. We seek to build on these strengths and use these strategies to generate revenue growth, maximize free cash flow, reduce leverage and maintain and enhance gross margins. RESTRUCTURING, RATIONALIZATION AND COST SAVINGS PLANS UCAR's Board of Directors adopted a global restructuring and rationalization plan in September 1998, and we launched new initiatives to enhance the plan in October 1999. We believe that the plan is the most aggressive major cost reduction plan currently being implemented in the graphite and carbon industry. We estimate that the enhanced plan will generate cost savings at an annualized run rate of about $100 million by the end of 2000 (about $27 million higher than at the end of 1999), $135 million by the end of 2001 and $165 million by the end of 2002 and thereafter. We achieved actual cost savings of $73 million in 1999, exceeding our original target of $64 million. We achieved actual cost savings (including an annualized reduction in interest expense as a result of our debt recapitalization completed in February 2000) of $68 million for the 2000 first nine months. The original plan included plant rationalization, plant cost reduction and overhead cost reduction. The plant rationalization phase of the plan involved the closure of our higher cost manufacturing facilities in Canada and Germany and the downsizing of our manufacturing facilities in Russia. The overhead cost reduction phase of the plan included consolidation and relocation of our corporate headquarter functions to Nashville, Tennessee and our European administrative functions in our Swiss subsidiary. We believe that the cost savings under the original plan have enabled us to strengthen our competitiveness. We also believe, however, that we must continue to enhance our focus on cost savings to achieve the ultimate objectives of the plan. Accordingly, in October 1999, we launched new initiatives that we estimate 28 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES will generate additional cost savings at an annualized run rate of $30 million by the end of 2002. Cost savings are having a favorable impact on gross margin. We completed a global benchmarking study during the 1999 third quarter that identified opportunities for performance improvements and cost savings in certain key global administrative and transaction processing functions. These opportunities are being addressed by our POWER OF ONE initiative and should allow for achievement of our target of reducing selling and administrative expenses to 8% of net sales by the end of 2002, a reduction of almost 30% as compared to 1998. We continue to evaluate and refine our debt, working capital and organizational structures to improve cash management and reduce tax expense. The debt recapitalization we completed in February 2000, along with our tax planning initiatives, should allow us to benefit from our existing and anticipated tax credits, helping us to achieve our targeted effective average annual tax rate of 25% over the four years ending 2002. The majority of the savings expected from implementation of these initiatives are anticipated to be realized during 2001 and 2002. Our enhanced plan targets the reduction of gross debt to $550 million by the end of 2002 and a substantial reduction in annual interest expense. Our ability to achieve these targets could be affected materially by such factors as changes in market interest rate levels, further delays in completing or failure to complete strategic alliance, joint venture or acquisition projects or financial alternatives to create more value for our stockholders from Graftech, changes in strategic plans or programs, or changes in conditions affecting us, our industry or our cost saving, tax planning or other initiatives. In support of our strategy, we have launched a global business transformation initiative entitled POWER OF ONE. POWER OF ONE is a coordinated global self-assessment and business process rationalization and transformation initiative driving one consistent theme throughout our organization: "becoming the best." We have mobilized global teams that are reassessing every aspect of the way we do business. The initiative has already challenged and empowered our workforce, identified business-to-business opportunities with existing and potentially new trading partners, and established targets for improving quality, speed and efficiency across our extended enterprise. The initiative will require an investment of about $7 million in 2000, of which about $3 million are capital expenditures, and a total investment of about $25 million over the three years ending 2002. We believe, however, that most of this investment will be funded from cost savings expected to be realized. The POWER OF ONE initiative also includes evaluating every aspect of our supply chain performance. We expect to achieve non-recurring improvement in cash flow from operations by reducing inventories, as measured against inventory levels and based on production levels for the 1999 first nine months (annualized), by over 20% (or $50 million), reducing inventories to about $180 million and reducing our cash cycle time by about one-third by the end of 2002. 29 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES During late 1999, our graphite specialties business, which accounted for about 9% of our net sales in 1999, experienced significant adverse change due to a decline in demand for graphite specialties (particularly from certain segments of the semiconductor industry), growth in supply due to expansion by other producers, a decline in prices for graphite specialties, and delays in bringing new and improved products to market. The assets and inventory of this business are located primarily at our plant in Clarksburg, West Virginia. Since the future estimated undiscounted cash flows expected to result from the use of these assets were below their respective carrying amounts, in the 1999 fourth quarter we wrote down the carrying value of these assets to their fair market value. Due to these same factors, in February 2000, we announced that we would restructure the business. The key elements of the restructuring consist of elimination of certain product lines, and rationalization of operations to reduce costs and improve profitability of remaining product lines, including demolition of certain buildings. Accordingly, in the 2000 first quarter, we recorded a restructuring charge of $6 million, primarily for severance costs for 65 employees and demolition and related environmental costs. We expect the restructuring to generate cost savings at an annual run rate of $7 million by the end of 2001. Subsequently, in 2000 third quarter, we decided not to demolish the buildings. Therefore, we reversed $4 million of the charge that related to demolition and related environmental costs. DEVELOPMENTS RELATING TO OUR GRAPHITE ELECTRODE BUSINESS We are realigning some of our global manufacturing capacity for graphite electrodes to our other product lines to optimize our total manufacturing capabilities in order to seek to maximize profitability. In response to growing global demand for graphite cathodes from aluminum producers, we have resourced our U.S. cathode production to our facility in Brazil and one of our facilities in France. In addition, in connection with the restructuring of our graphite specialties business, we are transferring the majority our graphite specialties production from our facility in Clarksburg, West Virginia to the same facility in France. Certain equipment previously used in Brazil and France to produce graphite electrodes will now be used to produce graphite cathodes and graphite specialties. As a result of these actions, our annual graphite electrode manufacturing capacity will be permanently reduced by about 15,000 metric tons, to 230,000 metric tons of rated capacity from about 275,000 metric tons of rated capacity in 1998. Effective capacity is about 95% of rated capacity, so our effective capacity is now about 220,000 metric tons. We expect investments required to accommodate these realignments to be funded from our normal capital expenditure program. We recorded a restructuring charge of $3 million in the 2000 third quarter in connection with these realignments. This was a non-cash charge related to the write-off of certain fixed assets located at our facility in the U.S. These realignments, including completion of the restructuring of our graphite specialties business, will take three to six months to fully implement. 30 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES In October 2000, we signed a letter of intent to enter into production and marketing joint ventures with Jilin Carbon Company ("JILIN") to produce and sell ultra-high power graphite electrodes in China. It is believed to be the largest graphite electrode market in the world. Jilin is the largest producer of graphite electrodes and other graphite and carbon products in China. It produces about 50,000 metric tons of graphite electrodes annually, and the production joint venture is expected to replace about 50% of that production with higher quality and better performing ultra high power graphite electrodes. The production joint venture is expected to have capacity to manufacture 20,000 metric tons of graphite electrodes annually and to be configured so as to be expandable to 30,000 metric tons. The production joint venture is expected to utilize renovated capacity at Jilin's main facility in Jilin City and to complete additions at another site in Changchun that were begun by Jilin. The first phase of renovations is expected to be completed by mid-2001. We will provide cash and technical assistance for a 25% ownership interest in the production joint venture. The parties intend to form a separate equally owned joint venture to market and sell the graphite electrodes produced by the production joint venture. These transactions are subject to customary terms and conditions, including negotiation of definitive agreements, completion of due diligence, and receipt of necessary governmental and corporate approvals. DEBT RECAPITALIZATION In February 2000, we completed a debt recapitalization. We obtained the New Senior Facilities, which consist of a $300 million, six year tranche A term loan facility, a $350 million, eight year tranche B term loan facility and a $250 million, six year revolving credit facility. The tranche A and revolving facilities are dollar/euro dual currency facilities. We used the net proceeds of the New Senior Facilities to terminate and repay about $490 million of term debt outstanding under the Prior Senior Facilities, to redeem all $200 million of the Subordinated Notes outstanding at a redemption price of 104.5% of the principal amount redeemed, plus accrued interest, to replace the outstanding borrowings under our old revolving credit facility, to repay certain other debt and to pay related expenses. The debt recapitalization: o lowered our average interest rate (at market interest rate levels prevailing at the time of the debt recapitalization) by about 200 basis points (equivalent to a reduction of interest expense of about $10 million for 2000 and $12 million on an annualized basis at debt levels prevailing at the time of the debt recapitalization), o extends the average maturities of our debt, o enables us to repay our debt without penalty or premium, and o increases our ability to repurchase common stock, make acquisitions and pursue strategic initiatives. 31 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES We recorded an extraordinary charge of $13 million, net of tax, in connection with our debt recapitalization. The charge includes the redemption premium on the Subordinated Notes, bank, legal, accounting, filing and other fees and expenses, and write-off of deferred debt issuance costs. In October 2000, our New Senior Facilities were amended to, among other things, increase the maximum leverage ratio permitted thereunder through June 30, 2001. In connection therewith, we paid an amendment fee of $2 million and increased the maximum margin which is added to either euro LIBOR or the alternate base rate in order to determine the interest rate payable thereunder by 25 basis points (equivalent to an increase in interest expense of about $2 million on an annualized basis at debt levels prevailing at the time of the debt recapitalizaion). DEVELOPMENTS RELATING TO GRAFTECH In February 2000, we announced that we were studying a number of financial alternatives to create more value for our stockholders from Graftech. Subsequently, we announced that we intended to proceed with an initial public offering of common stock of Graftech. In connection therewith, Graftech filed a registration statement with the SEC. We also announced that Graftech had entered into a memorandum of understanding with Mazarin Mining Corporation relating to possible development of a natural graphite flake deposit in Canada as a source of high quality, low cost raw material for Graftech. In June 2000, pursuant to the memorandum of understanding, we purchased from Mazarin common stock representing about 4% of its outstanding common stock and warrants to purchase common stock representing about another 4% of its common stock, for an aggregate of $1 million. In August 2000, we announced that we were postponing the offering because, under then current market conditions, we did not believe that the pricing in the offering would reflect the true enterprise value of Graftech. Accordingly, we did not believe it was in the long-term best interest of UCAR stockholders to complete the offering at that time. We will record a charge for costs incurred in connection with the offering if we do not proceed with the offering. In 2000, Graftech commenced installation of a new advanced flexible graphite manufacturing line at our facility in Parma, Ohio. This manufacturing line is expected to produce products for Ballard and other customers, and installation is expected to be completed in the 2001 first quarter. We expect to invest $9 million in connection with the installation of this manufacturing line. Graftech continues to pursue business opportunities relating to applications for flexible graphite in thermal management, fire protection and energy management as well as strengthening its relationship with Ballard. 32 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES LITIGATION MATTERS In February 2000, we commenced a lawsuit against our former parents, Mitsubishi Corporation ("MITSUBISHI") and Union Carbide Corporation ("UNION CARBIDE"). In the lawsuit, we allege, among other things, that certain payments made to our former parents were unlawful, that our former parents were unjustly enriched by receipts from their investments in us and that our former parents aided and abetted breaches of fiduciary duties owed to us by our former senior management in connection with illegal graphite electrode price fixing activities. We are seeking to recover more than $1.5 billion in damages, including interest. We expect to incur $10 million to $20 million in legal expenses to pursue this lawsuit through trial. Since 1997, we have been served with subpoenas, search warrants and information requests by antitrust authorities in the U.S., the European Union and elsewhere in connection with antitrust investigations. In addition, civil antitrust lawsuits have been commenced and threatened against us and other producers and distributors of graphite and carbon electrodes in the U.S. and elsewhere. We recorded a charge against results of operations for 1997 in the amount of $340 million as a reserve for estimated potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. In April 1998, UCAR pled guilty to a one count charge of violating U.S. federal antitrust law in connection with the sale of graphite electrodes and was sentenced to pay a fine in the aggregate amount of $110 million, payable in six annual installments (the "DOJ FINE"), of which $91 million is treated as a fine and $19 million is treated as imputed interest for accounting purposes. In March 1999, our Canadian subsidiary pled guilty to a one count charge of violating Canadian antitrust law in connection with the sale of graphite electrodes and was sentenced to pay a fine of Cdn. $11 million. We have settled virtually all of the graphite electrode antitrust claims by steelmakers in the United States and Canada as well as antitrust claims by certain other customers. None of the settlement or plea agreements in connection with antitrust investigations or related lawsuits or claims contain restrictions on future prices of our graphite electrodes. Actual liabilities and expenses could be materially higher than such reserve. The guilty pleas make it more difficult to defend against other investigations, lawsuits and claims. GLOBAL ECONOMIC CONDITIONS We are a global company and serve most geographic markets worldwide. Accordingly, we are impacted in varying degrees, both positively and negatively, as country or regional conditions affecting the markets for our products fluctuate. In 1998, the economic downturn in the Asia Pacific region directly or indirectly affected most of the worldwide markets for steel and other metals, semiconductors and certain other products made by our customers. This adversely affected demand and pricing for graphite electrodes and most of our other products. These circumstances negatively impacted our results of operations in 1998 and 1999. 33 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES In the 1999 second quarter, worldwide electric arc furnace steel production began to gradually recover as a result of the strength of the U.S. and European economies and the beginning of recovery in other areas of the global economy. Also, in 1999, worldwide production by customers for many of our other products began to gradually recover. We benefited from that recovery. Our volume of graphite electrodes sold in our home markets gradually increased and, in the 2000 second quarter, exceeded 1998 and 1999 levels. We announced graphite electrode price increases for various geographic markets in April, June, July, August and September 2000 for implementation in the 2000 second half and in 2001. Our average graphite electrode prices in the 2000 third quarter were still 10% below those in the 1999 third quarter. During 2000, demand for most of our other products has been relatively stable. In particular, we have seen steady demand for graphite cathodes from the aluminum industry. However, demand for graphite specialties, particularly from certain segments of the semiconductor industry, and for certain products sold to the silicon metals industry, has remained weak and demand for flexible graphite used for end-user industrial and automatic gasket sealing applications has weakened. Pricing for most products in our graphite and carbon products business segment has not strengthened. In the 2000 third quarter, the U.S. and European economies appear to be weakening, and this is directly or indirectly affecting most of the worldwide markets for steel and other metals and products made by our customers. This has and is expected to continue to adversely affect demand and pricing for graphite electrodes and many of our other products. These circumstances negatively impacted our results of operations in the 2000 third quarter and are expected to continue to do so in 2000 fourth quarter and early 2001. OUTLOOK During 1997 through 1999, we estimate that an aggregate of about 53 million metric tons of net new electric arc furnace steelmaking capacity was added worldwide. We estimate that about 18 million metric tons of that net new capacity was added in 1999. Further, we believe that a portion of the net new capacity added in the last three years has not yet become fully operational. We are aware of about 13 million metric tons of announced net new electric arc furnace steelmaking production capacity that has been or is scheduled to be added in 2000 and about 35 million metric tons that is scheduled to be added in 2001 through 2003. We believe that the graphite electrode manufacturing capacity utilization rate in the free trading markets was about 91% in 1997, about 85% in 1998, about 87% in 1999 and about 95% in the 2000 first nine months. Since September 1998, we have reduced our annual graphite electrode manufacturing capacity by about 45,000 metric tons. We believe that this reduction represented about 6% of estimated graphite electrode manufacturing capacity in the free trading markets. Since September 1998, two of our competitors have reduced their annual graphite electrode manufacturing capacity. Their announced reductions total more than 28,000 metric tons. 34 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES We announced a price increase of [euro]/$150 per metric ton in April 2000 and a second price increase in July 2000, which together bring the base price up to [euro]/$2,850 per metric ton for graphite electrodes sold in Western Europe and up to $2,850 per metric ton in Eastern Europe, Middle East, North Africa and Asia Pacific (excluding Japan). In June 2000, we announced a $150 per metric ton price increase for graphite electrodes sold in the U.S. and Canada, bringing the base price up to $2,975 per metric ton. We have received orders for over 10,000 metric tons of graphite electrodes at the new higher prices, most of which is expected to be shipped in the 2001 fourth quarter. However, with the majority of our net sales for the 2000 fourth quarter having been received, we expect that these price increases will have only limited positive impact on 2000 fourth quarter net sales. Nonetheless, these price increases should set a positive stage for price negotiations with customers for 2001. As is typically the case, we expect these negotiations to occur in the 2000 fourth quarter. The strength of the dollar as compared to the euro and other currencies in which we sell our products, as well as competitive pressures, could continue to adversely affect prices of our graphite electrodes as translated into dollars. This could adversely affect our earnings in future quarters. We expect demand for our graphite electrodes in the 2000 fourth quarter and early 2001 to be adversely affected by a slowdown in global steel production as well as our efforts to increase graphite electrode prices. We believe that global steel production is declining due to overproduction in the 2000 first half as well as weakness in the U.S. and European economies. In anticipation of possible lower demand next year and continuing our efforts to reduce inventories, we have reduced operating levels at certain of our facilities, including layoff of about 70 production employees in North America. Nonetheless, steel consumption is forecasted by industry sources to rise by another 2% in 2001 from the record levels of 2000. Accordingly, we believe that, once the steel supply/demand imbalance resulting from overproduction is corrected, demand for our graphite electrodes will remain stable, assuming that U.S., European and other regional economies do not experience substantial additional weakness. We expect to see improvements in selling prices to customers as we continue to implement our announced price increases next year. We believe that, on the whole, assuming that U.S., European and other regional economies do not experience substantial additional weakness, demand for most of our graphite and carbon products will remain relatively steady in the 2000 fourth quarter and 2001. We have initiated price increases for our cathodes and graphite specialties. We expect 2000 fourth quarter results for our graphite and carbon products to be similar to 2000 first nine months results and believe that the gross profit margin for our graphite and carbon products should improve going into 2001. Following completion of the restructuring of our graphite specialties business, we expect its gross profit margin to return to or exceed the early 1999 level by the end of 2001. While we continue to implement our strategies, including formation of strategic alliances, supply chain optimization, working capital and capital structure improvements, and other cost savings measures, we expect to be impacted by energy, petroleum products and other inflationary cost increases in the 2000 fourth quarter and 2001. 35 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES CURRENCY MATTERS We incur manufacturing costs and sell our products in multiple currencies. As a result, in general, our results of operations and financial condition are affected by changes in currency exchange rates and by inflation in countries with highly inflationary economies where we have manufacturing facilities. To manage certain exposures to risks caused by changes in currency exchange rates, we use various off-balance sheet financial instruments to attempt to hedge these exposures. To account for translation of foreign currencies into dollars for consolidation and reporting purposes, we record foreign currency translation adjustments in accumulated other comprehensive income (loss) as part of stockholders' equity in the Consolidated Balance Sheets, except in the case of operations in highly inflationary economies where we record foreign currency translation gains and losses as part of other (income) expense (net) in the Consolidated Statement of Operations. We also record foreign currency transaction gains and losses as part of other (income) expense (net). During 1999 and 2000 first nine months, many of the currencies in which we manufacture and sell our products weakened against the dollar. The most significant consisted of the weakening of the euro, which devalued about 18% against the dollar in 1999 and about 12% in the 2000 first nine months, the weakening of the Brazilian currency, which devalued about 49% against the dollar during 1999 and about 3% in the 2000 first nine months, and the weakening of the South African currency, which devalued about 15% in 2000 first nine months. HIGHLIGHTS OF THIRD QUARTER OPERATING RESULTS Net sales decreased by $7 million and, primarily as a result, gross profit decreased by $3 million (and gross profit margin decreased from 28.1% of net sales to 27.6% of net sales) and operating profit decreased by $2 million (and operating profit margin decreased to 16.0% of net sales from 17.0% of net sales), in each case as compared to the 2000 second quarter. However, interest expense was stable and total overhead decreased by $1 million in the 2000 third quarter as compared to the 2000 second quarter. Further, net debt decreased by $17 million at the end of the 2000 third quarter as compared to the end of the 2000 second quarter. Earnings for the 2000 third quarter were $7 million, or $0.16 per diluted share, as compared to 2000 second quarter earnings of $11 million, or $0.24 per diluted share. GRAPHITE ELECTRODE BUSINESS SEGMENT. Graphite electrode net sales decreased to $132 million in the 2000 third quarter from $137 million in the 2000 second quarter, primarily due to a decrease in sales volume. The decrease in sales volume was primarily attributable to a slowdown in production by electric arc furnace steel producers in North America and postponement of shipments to Europe due to transport strikes relating to the oil crisis. The volume of graphite 36 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES electrodes sold during the 2000 third quarter was 53,900 metric tons, as compared to 56,800 metric tons in the 2000 second quarter. This reduced net sales by $7 million. The impact of decreased sales volume was partially offset by an increase in average prices. The average sales revenue per metric ton in dollars of graphite electrodes in the 2000 third quarter was $2,406 as compared to the average in the 2000 second quarter of $2,374. The increase was primarily due to changes in product mix and price increases, partially offset by changes in currency exchange rates. Gross profit for this segment in the 2000 third quarter was $37 million (28.0% of net sales) as compared to 2000 second quarter gross profit of $41 million (29.9% of net sales). Cost of sales was negatively impacted by production inefficiencies and increased energy costs, which more than offset a favorable impact of changes in currency exchange rates and cost savings initiatives. This resulted in an increase in cost of sales of $70 per metric in the 2000 third quarter as compared to the 2000 second quarter. GRAPHITE AND CARBON PRODUCTS BUSINESS SEGMENT. Net sales of the graphite and carbon products segment decreased to $60 million in the 2000 third quarter from $62 million in the 2000 second quarter. The decrease was primarily due to a decrease in sales volume of cathodes attributable to seasonality and changes in product mix and, to a lesser extent, a decrease in sales volume of cathodes and flexible graphite products sold to Graftech's historical sealing market and changes in currency exchange rates. The decrease was partially offset by an increase in net sales in refractories and other product lines. Gross profit for this segment in the 2000 third quarter was $16 million (26.7% of net sales) as compared to 2000 second quarter gross profit of $15 million (24.2% of net sales). The increase in gross profit and gross profit margin was due primarily to increased net sales of refractories, cost improvements resulting from the restructuring of our graphite specialties business and cost reduction programs, partially offset by lower net sales. OTHER ITEMS. Total selling, administrative and other expenses were $20 million in the 2000 third quarter, a decrease of $3 million from $23 million in the 2000 second quarter, primarily due to reduced spending. Other income was $1 million lower in the 2000 third quarter than in the 2000 second quarter, primarily due to lower non-recurring insurance benefits, net of continuing legal expenses related to our litigation against our former parents and consulting expenses related to POWER OF ONE. For the 2000 third quarter, the effective income tax rate recorded was 41%, excluding the impact of special charges. This tax rate brings the effective income tax rate for the year up to 30%. The increase in the yearly tax rate is due to a higher percent of income in foreign jurisdictions with higher tax rates than we had anticipated. This was partially offset by a $20 million reduction in the 2000 third quarter of the deferred tax asset valuation allowance on foreign tax credits. This reduction was based on a reassessment in the 2000 third quarter of our U.S. tax profile and associated tax planning strategies. Cash flow from operations was a positive $18 million in the 2000 third quarter, before antitrust fines and net settlement and expense payments of $1 million and restructuring payments of $2 million. Net working capital decreased by $4 million in the 2000 third quarter as compared to the 2000 second quarter, before antitrust fines, net settlement and expense payments and restructuring payments. Cash flow from working capital was favorably affected by an increase in accounts payable and accruals and a decrease in inventories. Cash and cash equivalents totaled $11 million at September 30, 2000. Net debt (total debt less cash, cash equivalents and short-term investments) was $711 million at September 30, 2000, 37 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES a decrease of $17 million from June 30, 2000. The $17 million reduction was primarily due to currency translation of euro denominated debt as well as repayment of $2 million of principal. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2000 AS COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1999 Net sales of $192 million in the 2000 third quarter represented a $18 million, or 9%, decrease from $210 million in the 1999 third quarter. Gross profit of $53 million in the 2000 third quarter represented a $17 million, or 24%, decrease from $70 million in the 1999 third quarter. Gross profit margin was 27.6% in the 2000 third quarter as compared to 33.3% in the 1999 third quarter. The decrease in net sales and gross profit was primarily due to lower average sales revenue per metric ton in dollars. GRAPHITE ELECTRODE BUSINESS SEGMENT. Net sales of the graphite electrode business segment declined to $132 million in the 2000 third quarter from $144 million in the 1999 third quarter, primarily due to lower average prices, changes in product mix and changes in currency exchange rate, partially offset by increased sales volume. The average sales revenue per metric ton in dollars of graphite electrodes in the 2000 third quarter was $2,406 as compared to the 1999 third quarter average of $2,662. About 50% of the decline was due to lower average selling prices and changes in product mix, with the balance due to changes in currency exchange rates. The volume of graphite electrodes sold during the 2000 third quarter was 53,900 metric tons, an increase of 2% from the 53,100 metric tons sold in the 1999 third quarter. The lower average sales revenue per metric ton in dollars reduced net sales by $14 million, and the higher sales volume increased net sales by $2 million. Gross profit for this segment in the 2000 third quarter was $37 million (28.0% of net sales) as compared to gross profit in the 1999 third quarter of $51 million (35.4% net sales). The decrease in gross profit and gross profit margin was largely due to lower net sales, which more than offset the benefits of higher production levels on cost per metric ton and cost reduction programs. Cost of sales also benefited from changes in currency exchange rates. GRAPHITE AND CARBON PRODUCTS BUSINESS SEGMENT. Net sales of the graphite and carbon products business segment declined to $60 million in the 2000 third quarter from $66 million in the 1999 third quarter. While net sales in each of the major product lines in this segment decreased, most of the change resulted from the elimination of certain product lines related to the restructuring of our graphite specialties business, lower prices for most of our products and changes in currency exchange rates. 38 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES Gross profit for this segment in the 2000 third quarter was $16 million (26.7% of net sales) as compared to 1999 third quarter gross profit of $19 million (28.8 percent of net sales). The decrease in gross profit and gross profit margin of $3 million was mainly due to lower net sales, partially offset by the positive impact of changes in currency exchange rates on cost of sales. OPERATING PROFIT FOR US AS A WHOLE. Operating profit in the 2000 third quarter was $31 million, or 16.2% of net sales, as compared to $41 million, or 19.5% of net sales, after a charge of $13 million in connection with the settlement of securities class action and stockholder derivative lawsuits and a credit of $6 million in connection with graphite and carbon products business segment restructurings, in the 1999 third quarter. The decrease in operating profit was primarily due to lower gross profit. Selling, administrative and other expense was stable at $20 million in both the 2000 third quarter and 1999 third quarter. Increased costs related to the POWER OF ONE initiative were offset by cost savings. Other (income) expense (net) was nil in the 2000 third quarter as compared to income of $1 million in the 1999 third quarter. OTHER ITEMS AFFECTING US AS A WHOLE. Interest expense decreased to $18 million in the 2000 third quarter from $20 million in the 1999 third quarter. The decrease was primarily due to lower average interest rates due to our debt recapitalization in February 2000 and lower total debt. Average outstanding total debt was $783 million in the 2000 third quarter as compared to $768 million in the 1999 third quarter. The average annual interest rate was 8.2% in the 2000 third quarter as compared to 9.6% in the 1999 third quarter. These average annual interest rates exclude imputed interest on the DOJ fine. Provision for income taxes was $5 million in the 2000 third quarter as compared to nil in the 1999 third quarter. The effective income tax rate for the 2000 third quarter was 41%, excluding special charges (credits), as compared to the rate for the 1999 third quarter of 15%. The increase in the tax rate is due to the fact that we had a higher percent of income in foreign jurisdictions with higher tax rates than we had anticipated. This was partially offset by a $20 million reduction in the 2000 third quarter of the deferred tax asset valuation allowance on foreign tax credits. This reduction was based on a reassessment in the 2000 third quarter of our U.S. tax profile and associated tax planning strategies. As a result of the changes described above, net income was $7 million in the 2000 third quarter, a decrease of 67% from net income of $21 million in the 1999 third quarter. NINE MONTHS ENDED SEPTEMBER 30, 2000 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1999 Net sales of $586 million in the 2000 first nine months represented a $37 million, or 6%, decrease from $623 million in the 1999 first nine months. Gross profit of $166 million in the 2000 first nine months represented a $40 million, 39 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES or 19%, decrease from $206 million in the 1999 first nine months. Gross profit margin was 28.3% in the 2000 first nine months as compared to 33.1% in the 1999 first nine months. The decrease in net sales and gross profit was primarily due to lower average sales revenue per metric ton in dollars, partially offset by higher volumes sold. Cost savings programs generated savings of $68 million in the 2000 first nine months. This represented $13 million of incremental savings from the 1999 actual savings (annualized), and we expect to achieve the $20 million of incremental savings (annualized) targeted for 2000. GRAPHITE ELECTRODE BUSINESS SEGMENT. Net sales of the graphite electrode business segment declined to $398 million in the 2000 first nine months from $417 million in the 1999 first nine months, primarily due to lower average prices, changes in product mix and changes in currency exchange rates, partially offset by increased sales volume. The average sales revenue per metric ton in dollars of graphite electrodes in the first 2000 nine months was $2,420 as compared to average in the 1999 first nine months of $2,701. About 50% of the decline was due to lower average selling prices and changes in product mix, with the balance due to changes in currency exchange rates. The volume of graphite electrodes sold during the 2000 first nine months was 161,900 metric tons, an increase of 7% from 151,000 metric tons in the 1999 first nine months. The lower average sales revenue per metric ton in dollars reduced net sales by $46 million, and the higher sales volume increased net sales by $27 million. Gross profit for this segment in the first 2000 nine months was $118 million (29.6% of net sales) as compared to gross profit in the 1999 first nine months of $149 million (35.7% of net sales). The decrease in gross profit and gross profit margin was largely due to lower net sales and higher cost of sales due to higher production levels, which more than offset the benefits of cost reduction programs. Cost of sales also benefited from changes in currency exchange rates. GRAPHITE AND CARBON PRODUCTS BUSINESS SEGMENT. Net sales of the graphite and carbon products business segment declined to $188 million in the 2000 first nine months from $206 million in the 1999 first nine months. While net sales in each of the major product lines in this segment decreased, most of the change resulted from the elimination of certain product lines related to the restructuring of our graphite specialties business, lower selling prices for cathodes and carbon electrodes, and changes in currency exchange rates which more than offset increases in sales volume of cathodes and carbon electrodes. Gross profit for this segment in the 2000 first nine months was $48 million (25.5% of net sales) as compared to gross profit in the 1999 first nine months of $57 million (27.7% of net sales). The decrease in gross profit and gross profit margin was mainly due to lower net sales. OPERATING PROFIT FOR US AS A WHOLE. Operating profit was $88 million, or 15.0% of net sales, in the 2000 first nine months as compared to $134 million, or 21.5% of net sales, after a charge of $13 million in connection with the settlement of securities class action and stockholder derivative lawsuits and a credit of $6 million in connection with graphite and carbon products business 40 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES segment restructurings, and after income of $7 million in the 1999 first nine months. The decrease in operating profit and operating profit margin was primarily due to lower gross profit. Selling, administrative and other expense was $67 million in the 2000 first nine months, an increase of $2 million, or 3%, from $65 million in the 1999 first nine months. The increase was attributable primarily to costs associated with the POWER OF ONE initiative and an increase in the number of administrative employees, partially offset by cost savings. Other (income) expense (net) was income of $1 million in the 2000 first nine months as compared to income of $7 million in the 1999 first nine months. Other income in the 1999 first nine months included a gain of $2 million from the sale of our spray cooled systems business. Other income in the 2000 first nine months included nonrecurring insurance benefits and favorable net currency transaction and translation gains partially offset by legal expenses related to the lawsuit against our former parents, reduced interest income and reduced miscellaneous asset sales. OTHER ITEMS AFFECTING US AS A WHOLE. Interest expense decreased to $57 million in the 2000 first nine months from $64 million in the 1999 first nine months. The decrease was due to lower average interest rates due to our debt recapitalization in February 2000 and lower average outstanding total debt. Average outstanding total debt was $770 million in the 2000 first nine months as compared to $825 million in the 1999 first nine months. The average annual interest rate was 9.2% in the 2000 first nine months as compared to 9.9% in the 1999 first nine months. These average annual interest rates exclude imputed interest on the DOJ fine. Provision for income taxes was $9 million in the 2000 first nine months as compared to $13 million in the 1999 first nine months. The effective income tax rate for the 2000 first nine months was 30% as compared to the rate for the 1999 first nine months of 23%, excluding special charges (credits). The increase in the effective tax rate is due to the fact that we had a higher percent of income in foreign jurisdictions with higher tax rates than we had anticipated. This was partially offset by a $20 million reduction in the 2000 third quarter of the deferred tax asset valuation allowance on foreign tax credits. This reduction was based on a reassessment in the 2000 third quarter of our U.S. tax profile and associated tax planning strategies. In the 2000 first nine months, we recorded an extraordinary charge of $13 million, net of tax, for costs, fees and expenses in connection with our debt recapitalization in February 2000. As a result of the changes described above, net income before extraordinary item was $20 million in the 2000 first nine months, a decrease of 64% from net income of $55 million in the 1999 first nine months. LIQUIDITY AND CAPITAL RESOURCES Our sources of funds have consisted principally of invested capital, cash flow from operations and debt financing. Cash flow for 2000 third quarter from operations was $17 million (before antitrust fines and net settlement and 41 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES expense payments of $1 million and restructuring payments of $3 million), and $62 million for the 2000 first nine months (before antitrust fines and net settlement and expense payments of $17 million and restructuring payments of $6 million). Our uses of those funds (other than for operations) have consisted principally of debt reduction, capital expenditures and payment of fines, liabilities and expenses in connection with investigations, lawsuits and claims. We are highly leveraged and have substantial obligations in connection with investigations, lawsuits and claims. We had total debt of $722 million at both September 30, 2000 and December 31, 1999 and stockholders' deficit of $313 million at September 30, 2000 as compared to a deficit of $293 million at December 31, 1999. Cash and cash equivalents and short-term investments were $11 million at September 30, 2000 as compared to $20 million at December 31, 1999. At September 30, 2000, there was an aggregate of $91 million of borrowings outstanding under our revolving credit facility. Net debt (total debt net of cash, cash equivalents and short-term investment) was $711 million at September 30, 2000 as compared to $702 million at December 31, 1999. The increase in net debt was primarily due to the scheduled third installment of $15 million of the DOJ fine paid in April 2000, partially offset by the impact of translation of euro denominated debt. Our liquidity and financial position continue to be impacted by obligations arising out of antitrust investigations, lawsuits and claims as well as our financial performance. CASH FLOW PROVIDED BY OPERATING ACTIVITIES Cash flow provided by operating activities was $40 million in the 2000 first nine months as compared to $60 million in the 1999 first nine months. The $20 million decrease in cash flow was due primarily to lower net income before restructuring charges (credits) and an extraordinary charge, net of tax, for costs, fees and expenses in connection with our debt recapitalization in February 2000. Cash flow used in working capital declined by $13 million to $32 million in the 2000 first nine months as compared to $45 million in the 1999 first nine months. The benefits of a reduction in payments for antitrust investigations and related lawsuits and claims, net, and in restructuring payments was partially offset by higher inventories before giving effect to changes in currency exchange rates. Global work process improvements and supply chain optimization efforts helped to achieve record low inventories of $195 million at September 30, 2000, after giving effect to changes in currency exchange rates, as compared to a peak of $264 million at the end of 1998. Our first successful graphite electrode facility implementation of lean manufacturing and demand-pull processes occurred in the 2000 third quarter. These activities are currently in process across our global manufacturing network, and we are expected to result in further inventory reductions through 2001. CASH FLOW USED IN INVESTING ACTIVITIES Cash flow used in investing activities was relatively stable at $34 million for the 2000 first nine months and $33 million for the 1999 first nine months. Most of the cash flow used in investing activities in both periods was used for capital expenditures. Capital expenditures in the 2000 first nine months were $7 42 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES million lower than in the 1999 first nine months. In the 2000 first nine months, we used $1 million to purchase common stock and warrants of Mazarin Mining Corporation. In the 1999 first nine months, we received $3 million from the sale of our spray-cool systems business. CASH FLOW USED IN FINANCING ACTIVITIES Cash flow used in financing activities was $11 million for the 2000 first nine months as compared to $70 million in the 1999 first nine months. In the 1999 first nine months, we reduced our total debt from the beginning of the period to the end of the period by $69 million. In the 2000 first nine months, we increased our total debt by $15 million. We incurred $26 million ($13 million, net of tax) of costs, fees and expenses in connection with our debt recapitalization in February 2000. ACCOUNTING MATTERS In 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") 133, "Accounting for Derivative Instruments and Hedging Activities," which requires that an entity recognize all derivative instruments as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS 133, as amended by SFAS 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," and SFAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of FASB Statement No. 133," is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. We are currently evaluating the impact of SFAS 133 on our financial position and results of operations in the period of adoption. In 1999, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial Statements," which summarizes the staff's views regarding the application of generally accepted accounting principles to selected revenue recognition issues. We are evaluating whether SAB 101 will require any change in our revenue recognition policies and procedures. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risks primarily from changes in interest rates and currency exchange rates. To manage our exposure to these changes, we routinely enter into various transactions that have been authorized according to documented policies and procedures. We do not use derivatives for trading or speculative purposes or to generate income. Our exposure to changes in interest rates results primarily from floating rate long-term debt tied to LIBOR or euro LIBOR. We enter into agreements with financial institutions which are intended to limit, or cap, our exposure to incurrence of additional interest expense due to increases in variable interest rates. During 1997, we purchased interest rate caps on up to $250 million of 43 PART I (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES debt, limiting the floating interest rate factor on this debt to a weighted-average rate of 8.2% for the period commencing February 1998 and continuing through various dates ending February 2001. In February 1999, we purchased interest rate caps on $470 million of debt, limiting the floating interest rate factor on this debt to 5.1% through 1999. In the 2000 first quarter, we purchased interest rate caps on $346 million of debt and entered into interest rate swaps for $100 million of debt, limiting the floating interest rate factor on this debt to 6.5% through various dates ending in February 2001. Fees related to these agreements are charged to interest expense over the term of the agreements. Our exposure to changes in currency exchange rates results primarily from: o investments in our foreign subsidiaries and in our share of the earnings of those subsidiaries, which are denominated in local currencies, o raw material purchases made by our foreign subsidiaries in a currency other than the local currency, and o export sales made by our subsidiaries in a currency other than the local currency. When we deem it appropriate, we may attempt to limit our risks associated with changes in currency exchange rates through both operational and financial market activities. Financial instruments are used to attempt to hedge existing exposures, firm commitments and, potentially, anticipated transactions. We use forward, option and swap contracts to reduce risk by essentially creating offsetting currency exposures. We held contracts for the purpose of hedging against these risks with an aggregate notional amount of about $449 million at September 30, 2000 and $233 million at December 31, 1999. All of our contracts mature within one year. All of our contracts are marked-to-market and, accordingly, transaction gains and losses are reflected in the Consolidated Statements of Operations. Unrealized gains and losses on our outstanding contracts were $7 million unrealized gain at December 31, 1999 and $6 million unrealized loss at September 30, 2000. We used a sensitivity analysis to assess the potential effect of changes in currency exchange rates and interest rates on reported earnings for the 2000 first nine months (annualized), assuming such changes had occurred on September 30, 2000. Based on this analysis, a hypothetical 10% weakening or strengthening in the dollar would have resulted in a change in our annualized earnings of about $3 million to $6 million. A hypothetical increase in interest rates of 100 basis points across all maturities would have increased our annual interest expense by about $7 million. During the 2000 first nine months, many of the currencies of countries in which we manufacture and sell our products weakened against the dollar. The most significant change occurred relative to the euro, which devalued by about 12% against the dollar in the 2000 first nine months. These currency changes resulted in a $28 million reduction in stockholders' equity in the 2000 first nine months due to cumulative translation adjustments. 44 PART II. (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES ITEM 1. LEGAL PROCEEDINGS ANTITRUST MATTERS ANTITRUST INVESTIGATIONS On June 5, 1997, we were served with subpoenas issued by the United States District Court for the Eastern District of Pennsylvania (the "DISTRICT COURT") to produce documents to a grand jury convened by attorneys for the Antitrust Division of the U.S. Department of Justice (the "DOJ") and a related search warrant in connection with a criminal investigation as to whether there had been any violation of U.S. federal antitrust law by producers of graphite electrodes. Concurrently, representatives of Directorate General-Competition of the Commission of the European Communities, the antitrust enforcement authority of the European Union (the "EU COMPETITION AUTHORITY"), visited offices of one of our French subsidiaries for purposes of gathering information in connection with an investigation as to whether there had been any violation of the antitrust law of the European Community by those producers. In October 1997, we were served with subpoenas by the DOJ to produce documents relating to, among other things, our carbon electrode and bulk graphite businesses. On April 7, 1998, pursuant to a plea agreement between the DOJ and UCAR, the DOJ charged UCAR and unnamed co-conspirators with participating from at least July 1992 until at least June 1997 in an international conspiracy involving meetings and conversations in the Far East, Europe and the U.S. resulting in agreements to fix prices and allocate market shares in the U.S. and elsewhere, to restrict co-conspirators' capacity and to restrict non-conspiring producers' access to manufacturing technology for graphite electrodes. On April 24, 1998, pursuant to the plea agreement, UCAR pled guilty to a one count charge of violating U.S. federal antitrust law in connection with the sale of graphite electrodes and was sentenced to pay a non-interest-bearing fine in the aggregate amount of $110 million. The fine is payable in six annual installments of $20 million, $15 million, $15 million, $18 million, $21 million and $21 million, commencing 1998. The plea agreement was approved by the District Court and, as a result, under the plea agreement, we will not be subject to prosecution by the DOJ with respect to any other violations of U.S. federal antitrust law occurring prior to April 1998. The payments due in 1998, 1999 and 2000 were timely made. In January 2000, pursuant to a plea agreement with the DOJ, Robert P. Krass, former Chairman of the Board, President and Chief Executive Officer, who retired and resigned from all positions with us in March 1998, pled guilty to a one count charge of violating U.S. federal antitrust law in connection with the sale of graphite electrodes and was sentenced to a term of incarceration and payment of a fine. In February 2000, pursuant to a plea agreement with the DOJ, Robert J. Hart, former Senior Vice President and Chief Operating Officer, who retired and resigned from all positions with us in March 1998, pled guilty to a similar charge and was sentenced to a term of incarceration and payment of a fine. In January 2000, George S. Schwegler, former Director, Export Sales Europe, was indicted by the DOJ on a similar charge. We do not intend to reimburse Messrs. Krass and Hart for their fines or Mr. Schwegler for any costs or fines he may incur as a result of such indictment. 45 PART II (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES In January 2000, Mitsubishi Corporation, one of our former parents, was indicted by the DOJ on a one count charge of aiding and abetting violations of U.S. federal antitrust law in connection with the sale of graphite electrodes. In April 1998, the Canadian Competition Bureau (the "COMPETITION BUREAU") commenced a criminal investigation as to whether there had been any violation of Canadian antitrust law by producers of graphite electrodes. In March 1999, pursuant to a plea agreement between our Canadian subsidiary and the Competition Bureau, our Canadian subsidiary pled guilty to a one count charge of violating Canadian antitrust law in connection with the sale of graphite electrodes and was sentenced to pay a fine of Cdn.$11 million. The relevant Canadian court approved the plea agreement and, as a result, under the plea agreement, we will not be subject to prosecution by the Competition Bureau with respect to any other violations of Canadian antitrust law occurring prior to the date of the plea agreement. The fine was timely paid. We became aware, in June 1998, that the Japanese antitrust enforcement authority had commenced an investigation as to whether there had been any violation of Japanese antitrust law by producers and distributors of graphite electrodes. In addition, we became aware, in October 1999, that the Korean antitrust authority had commenced an investigation as to whether there had been any violation of Korean antitrust law by producers and distributors of graphite electrodes. We have no facilities or employees in Japan or Korea. We believe that, among other things, we have good defenses to any claim that we are subject to the jurisdiction of either such authority. In March 1999, the Japanese antitrust authority issued a warning letter to the four Japanese graphite electrode producers. While the Japanese antitrust authority did not issue a similar warning letter to us, the warning letter issued to the Japanese producers did reference us as a member of an alleged cartel. In January 2000, the EU Competition Authority issued a statement of objections initiating proceedings against us and other producers of graphite electrodes. The statement alleges that we and other producers violated antitrust laws of the European Community and the European Economic Area in connection with the sale of graphite electrodes. The statement does not set forth any proposed fines or the impact which cooperation by us or other producers would have on the respective fines, if any. The maximum fine for such a violation is ten percent of a company's revenue during the year preceding the year in which the fine is assessed. We believe that we have provided substantial cooperation to the EU Competition Authority and are, therefore, entitled to a reduction in the amount of any fine which would otherwise be assessed. We believe that proceedings of this nature typically continue for about nine to twelve months before any fine is assessed. Any such assessment would be subject to appeal before the Court of First Instance in Luxembourg, although the fine or collateral security therefore would be payable three months after such assessment. We are continuing to cooperate with the DOJ and the Competition Bureau in their continuing investigations of other producers and distributors of graphite electrodes. We are also cooperating with the EU Competition Authority in its on-going investigation. In connection therewith, we have produced and are producing documents and witnesses. It is possible that antitrust investigations 46 PART II (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES seeking, among other things, to impose fines and penalties could be initiated by authorities in other jurisdictions. The guilty pleas make it more difficult for us to defend against other investigations as well as civil lawsuits and claims. We have been vigorously protecting, and intend to continue to vigorously protect, our interests in connection with the investigations described above. We may, however, at any time settle any possible unresolved charges. ANTITRUST LAWSUITS In 1997, we and other producers of graphite electrodes were served with complaints commencing various antitrust class action lawsuits. Subsequently, the complaints were either withdrawn without prejudice to refile or consolidated into a single complaint in the District Court (the "ANTITRUST CLASS ACTION LAWSUIT"). In the consolidated complaint, the plaintiffs allege that the defendants violated U.S. federal antitrust law in connection with the sale of graphite electrodes. In August 1998, the District Court certified a class of plaintiffs consisting of all persons who purchased graphite electrodes in the U.S. (the "CLASS") directly from the defendants during the period from July 1, 1992 through June 30, 1997 (the "CLASS PERIOD"). In 1998 and 1999, we and other producers of graphite electrodes were served by steelmakers in the United States and Canada with complaints and petitions commencing nine separate civil antitrust lawsuits in various courts (the "OTHER INITIAL LAWSUITS"). In the complaints and petitions, the plaintiffs allege that the defendants violated U.S. federal, Texas and Canadian antitrust laws and Canadian conspiracy law in connection with the sale of graphite electrodes. In 1999, we and other producers of graphite electrodes were served with two complaints commencing two separate civil antitrust lawsuits in the District Court. The first complaint entitled FERROMIN INTERNATIONAL TRADE CORPORATION, ET AL. V. UCAR INTERNATIONAL INC., ET AL. was filed by 26 steelmakers and related parties, all but one of whom are located outside the U.S., and the second complaint entitled BHP NEW ZEALAND LTD. ET AL. V. UCAR INTERNATIONAL INC., ET AL. was filed by 4 steelmakers, all of whom are located outside the U.S. In each complaint, the plaintiffs allege that the defendants violated U.S. federal antitrust law in connection with the sale of graphite electrodes sold or sourced from the U.S. and those sold and sourced outside the U.S. The plaintiffs seek, among other things, an award of treble damages resulting from such alleged antitrust violations. We believe that we have strong defenses against claims alleging that purchases of graphite electrodes outside the U.S. are actionable under U.S. federal antitrust law. In 1999 and 2000, we were served with three complaints commencing three civil antitrust lawsuits. The first complaint, filed in the District Court, is entitled GLOBE METALLURGICAL, INC. V. UCAR INTERNATIONAL INC., ET AL. The second complaint, filed in United States Bankruptcy Court for the Northern District of Ohio, is entitled IN RE SIMETCO, INC. The third complaint, filed in the United States District Court for the Southern District of West Virginia, is entitled ELKEM METALS COMPANY INC and ELKEM METALS COMPANY ALLOY LLP V. UCAR CARBON COMPANY INC., ET AL. (together with the first and second complaints, the "CARBON ELECTRODE LAWSUITS"). SGL Carbon AG is also named as a defendant in the first complaint and SGL Carbon Corporation is also named as a defendant in the third 47 PART II (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES complaint. In the complaints, the plaintiffs allege that the defendants violated U.S. federal antitrust law in connection with the sale of carbon electrodes and seek, among other things, an award of treble damages resulting from such alleged violations. The guilty pleas described above do not relate to carbon electrodes. Certain customers who purchased graphite electrodes, carbon electrodes or other products from us have threatened to commence antitrust lawsuits against us in the U.S. or in other jurisdictions with respect to the subject matter of the investigations and lawsuits described above. We are aware that Messrs. Krass and Hart have been named as defendants in certain civil antitrust lawsuits. We do not intend to reimburse them for any of their liabilities or expenses in connection therewith. Through November 6, 2000, except as described in the next paragraph, we have settled all of the lawsuits described above, certain of the threatened civil antitrust lawsuits and certain possible antitrust claims by certain other customers who negotiated directly with us. The settlements cover virtually all of the actual and potential claims against us by customers in the U.S. and Canada arising out of alleged antitrust violations occurring prior to the date of the respective settlements in connection with the sale of graphite electrodes. Although each settlement is unique, in the aggregate they consist primarily of current and deferred cash payments with some product credits and discounts. All payments due thereunder have been timely made. Amounts due under the settlement of the antitrust class action will increase to the extent that additional undisputed claims are filed by members of the class (which includes purchasers of graphite electrodes who are located outside the U.S. but who purchased graphite electrodes from our U.S. subsidiaries). The foreign customer lawsuits and the carbon electrode lawsuits have not been settled and are still in their early stages. We have been vigorously defending against these lawsuits as well as all threatened lawsuits and possible unasserted claims, including those mentioned above. We may at any time, however, settle these lawsuits as well as any threatened lawsuits and possible claims. It is possible that additional civil antitrust lawsuits seeking, among other things, to recover damages could be commenced against us in the U.S. and in other jurisdictions. 1997 ANTITRUST EARNINGS CHARGE We recorded a pre-tax charge of $340 million against results of operations for 1997 as a reserve for potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. The $340 million reserve is calculated on a basis net of, among other things, imputed interest on installment payments of the DOJ fine. Actual aggregate liabilities and expenses (including settled investigations, lawsuits and claims as well as the on-going investigation by the EU Competition Authority and unsettled pending, threatened and possible lawsuits and claims mentioned above) could be materially higher than $340 million. To the extent that aggregate liabilities and expenses, net, are known or reasonably estimable, at November 6, 2000, such amount continues to 48 PART II (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES represent our estimate of such liabilities and expenses. In the aggregate, the fines and settlements described above and related expenses, net, are within the amounts we used to evaluate the $340 million charge. Through September 30, 2000, we have paid an aggregate of $226 million of fines and net settlement and expense payments and $12 million of imputed interest. At September 30, 2000, $114 million remains in the reserve and, based on information known to us at November 6, 2000, the aggregate amount of remaining committed payments for fines and settlements at September 30, 2000 was about $64 million. The aggregate amount of remaining committed payments for imputed interest at September 30, 2000 was about $8 million. About $26 million of the committed payments for fines and settlements are due on or before September 30, 2001. STOCKHOLDER DERIVATIVE AND SECURITIES CLASS ACTION LAWSUITS In March 1998, UCAR was served with a complaint commencing a stockholder derivative lawsuit in the Connecticut Superior Court (Judicial District of Danbury). Certain former and current officers and directors were named as defendants. UCAR was named as a nominal defendant. In October 1999, UCAR and the individual defendants entered into an agreement settling the lawsuit. The settlement became final in January 2000. In April and May 1998, UCAR was served with complaints commencing securities class actions in the U.S. District Court for the District of Connecticut. The complaints were consolidated into a single complaint and the Florida State Board of Administration was designated lead plaintiff. UCAR and certain former and current officers and directors were named as defendants. The class of plaintiffs consists of all persons (other than the defendants) who purchased common stock during the period from August 1995 through March 1998. In October 1999, UCAR and the individual defendants entered into an agreement settling the lawsuit. The settlement became final in February 2000. Under the settlements, a total of $40.5 million was contributed to escrow accounts for the benefit of former and current stockholders who are members of the class of plaintiffs for whom the securities class action was brought as well as plaintiffs' attorney's fees. We contributed $11.0 million and the insurers under our directors and officers' insurance policies at the time the lawsuits were filed contributed the balance of $29.5 million. In addition, Mary B. Cranston, a new outside director acceptable to both UCAR and the Florida State Board of Administration, the eighth largest state employees' pension fund, was added to UCAR's Board of Directors. We incurred about $2.0 million of unreimbursed expenses related to the lawsuits. These expenses, together with the $11.0 million, were recorded as a charge to operations of $13.0 million in the 1999 third quarter. In the 2000 second quarter, we reversed $1 million of this charge because actual expenses were lower than anticipated. OTHER PROCEEDINGS AGAINST US We are involved in various other investigations, lawsuits, claims and other legal proceedings incidental to the conduct of our business. While it is not possible to determine the ultimate disposition of each of them, we do not 49 PART II (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES believe that their ultimate disposition will have a material adverse effect on us. LAWSUIT INITIATED BY US AGAINST OUR FORMER PARENTS In February 2000, at the direction of a special committee of independent directors of UCAR's Board of Directors, we commenced a lawsuit in the U.S. District Court for the Southern District of New York against our former parents, Mitsubishi and Union Carbide. The other defendants named in the lawsuit are Mitsubishi International Corporation, a U.S. subsidiary of Mitsubishi Corporation, and two of the respective representatives of Mitsubishi and Union Carbide who served on UCAR's Board of Directors at the time of our leveraged equity recapitalization in 1995, Hiroshi Kawamura and Robert D. Kennedy. Mr. Kennedy, who was a director of UCAR at the time the lawsuit was commenced, resigned as such on March 14, 2000. In the lawsuit, we allege, among other things, that, in January 1995, Mitsubishi and Union Carbide had knowledge of facts indicating that UCAR had engaged in illegal graphite electrode price fixing activities and that any determination of UCAR's statutory capital surplus would be overstated as a result of those activities. We also allege that certain of their representatives knew or should have known about those activities. Mitsubishi was indicted by the DOJ in January 2000 for aiding and abetting those activities and was named as a defendant in several civil antitrust lawsuits commenced by electric arc furnace steel producers with respect to its alleged participation in those activities. In addition, we allege that, in January 1995, UCAR did not have the statutory capital surplus required to lawfully authorize the payments that UCAR made to its former parents. We also allege that Mitsubishi and Union Carbide were unjustly enriched by receipts from their investments in UCAR and that they knowingly induced or actively and substantially assisted former senior management of UCAR to engage in illegal graphite electrode price fixing activities in breach of their fiduciary duties to UCAR. Based on the allegations summarized above, we believe that Mitsubishi and Union Carbide are liable for more than $1.5 billion in damages, including interest. Some of our claims provide for joint and several liability; however, damages from our various claims would not generally be additive to each other. We believe that our claims are strong, and are confident about the ultimate outcome. Accordingly, we afforded the defendants the opportunity to settle this lawsuit in advance of filing the complaint in the interest of achieving a fair and expeditious resolution. We intend to vigorously pursue this lawsuit to trial. The defendants have filed motions to dismiss the lawsuit and motions to disqualify certain of our counsel from representing us in the lawsuit. We are vigorously opposing those motions. Litigation such as this lawsuit is complex. Complex litigation can be lengthy and expensive. We expect to incur between $10 million and $20 million for legal expenses to pursue this lawsuit through trial. These expenses will be accounted as operating expenses and will be expensed as incurred. Through September 30, 2000, we incurred $3 million of such legal expenses. This lawsuit is in its 50 PART II (CONT'D) UCAR INTERNATIONAL INC. AND SUBSIDIARIES earliest stages, and the ultimate outcome of litigation such as this lawsuit is subject to many uncertainties, both substantive and procedural, including statute of limitation and other defenses, claims for indemnification and other counterclaims as well as those motions to dismiss and motions to disqualify. We may at any time settle this lawsuit. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS RECENT SALES OF UNREGISTERED SECURITIES In the 2000 first nine months, UCAR sold an aggregate of 18,556 shares of common stock to certain members of senior management under an executive employee stock purchase program. The shares were sold for an aggregate of $225,000. These sales were exempt from registration under Section 4(2) of the Securities Act of 1933 because the shares were sold in transactions not involving any public offering. In the 2000 first nine months, certain officers and other employees elected to defer an aggregate of $1,250,000 of compensation pursuant to our compensation deferral program, payment of which will be based on the performance of 81,200 shares of common stock as measured against the market price of the common stock on the date of deferral. Such transactions were exempt from registration under Section 4(2) of the Securities Act of 1933 because the transactions did not involve the public offering of securities. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS The exhibits listed in the following table have been filed as part of this Quarterly Report on Form 10-Q. EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 10.7 First Amendment dated as of October 11, 2000 to Credit Agreement dated as of February 22, 2000 among UCAR International Inc., UCAR Global Enterprises Inc., UCAR Finance Inc., the LC Subsidiaries party thereto, the Lenders party thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent, Collateral Agent and Issuing Bank 27.1 Financial Data Schedule - 2000 Third Quarter 27.1A Restated Financial Data Schedule - 2000 Second Quarter (B) REPORTS ON FORM 8-K No Report on Form 8-K was filed during the quarter for which this Quarterly Report on Form 10-Q is filed. 51 UCAR INTERNATIONAL INC. SIGNATURE Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. UCAR INTERNATIONAL INC. Date: November 6, 2000 By: /S/ CORRADO F. DEGASPERIS ------------------------- Corrado F. DeGasperis VICE PRESIDENT AND CHIEF INFORMATION OFFICER (PRINCIPAL ACCOUNTING OFFICER) 52 UCAR INTERNATIONAL INC. INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION 10.7 First Amendment dated as of October 11, 2000 to Credit Agreement dated as of February 22, 2000 among UCAR International Inc., UCAR Global Enterprises Inc., UCAR Finance Inc., the LC Subsidiaries party thereto, the Lenders Party thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent, Collateral Agent and Issuing Bank 27.1 Financial Data Schedule - 2000 Third Quarter 27.1A Restated Financial Data Schedule - 2000 Second Quarter
E-1 EX-10.7 2 0002.txt FIRST AMENDMENT TO CREDIT AGREEMENT CONFORMED COPY FIRST AMENDMENT dated as of October 11, 2000 (this "Amendment"), to the Credit Agreement dated as of February 22, 2000 (the "Credit Agreement") among UCAR International Inc., a Delaware corporation ("UCAR"), UCAR Global Enterprises Inc., a Delaware corporation ("Global"), UCAR Finance Inc., a Delaware corporation (the "Borrower"), the LC Subsidiaries from time to time party thereto, the Lenders from time to time party thereto and Morgan Guaranty Trust Company of New York, as Administrative Agent, Collateral Agent and Issuing Bank. A. Pursuant to the Credit Agreement, the Lenders and the Issuing Bank have extended credit to the Borrower and the LC Subsidiaries, and have agreed to extend credit to the Borrower and the LC Subsidiaries, in each case pursuant to the terms and subject to the conditions set forth therein. B. The Borrower has informed the Administrative Agent that it seeks an amendment of the Credit Agreement as set forth herein. C. The Required Lenders are willing to agree to such amendment pursuant to the terms and subject to the conditions set forth herein. D. Each capitalized term used and not otherwise defined herein shall have the meaning assigned to such term in the Credit Agreement. Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Amendments to the Credit Agreement. (a) The following new definition is hereby added to Section 1.01 of the Credit Agreement in its appropriate alphabetical position: "Amendment Fee" shall have the meaning assigned to such term in the First Amendment dated as of October 11, 2000 to this Agreement. (b) The definition of "Applicable Rate" in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "Applicable Rate" shall mean, for any day, (a) with respect to (i) any Revolving Loan or Tranche A Term Loan or (ii) the commitment fees payable hereunder, the applicable rate per annum set forth under the appropriate caption in Table I below or (b) with respect to any Tranche B Term Loan, the applicable rate per annum set forth under the appropriate caption in Table II below, in each case based upon the Leverage Ratio as of the most recent determination date: TABLE I ================================================================ Eurocurrency Base Rate Commitment Fee Leverage Ratio: Spread Spread Rate ---------------------------------------------------------------- Category 1 >3.75 2.75% 1.75% 0.500% - ---------------------------------------------------------------- Category 2 < 3.7 and > 3.50 2.63% 1.63% 0.500% - ---------------------------------------------------------------- Category 3 < 3.50 > 2.75 2.50% 1.50% 0.500% - ---------------------------------------------------------------- Category 4 <2.75 and >2.50 2.25% 1.25% 0.500% - ---------------------------------------------------------------- Category 5 <2.50 and >2.25 2.00% 1.00% 0.375% - ---------------------------------------------------------------- Category 6 <2.25 and >2.00 1.75% 0.75% 0.375% - Category 7 <2.00 and >1.75 1.50% 0.50% 0.375% - Category 8 <1.75 1.00% 0.00% 0.375% ================================================================ TABLE II ========================================================== Eurocurrency Base Rate Leverage Ratio: Spread Spread ---------------------------------------------------------- Category 1 >3.75 3.00% 2.25% - ---------------------------------------------------------- Category 2 <3.75 and >3.50 2.88% 2.13% - ---------------------------------------------------------- Category 3 <3.50 and >2.75 2.75% 2.00% - ---------------------------------------------------------- Category 4 <2.75 and >2.50 2.75% 2.00% - ---------------------------------------------------------- Category 5 <2.50 and >2.25 2.50% 1.50% - ---------------------------------------------------------- Category 6 <2.25 and >2.00 2.50% 1.50% - -3- ---------------------------------------------------------- Category 7 <2.00 and >1.75 2.50% 1.50% - ---------------------------------------------------------- Category 8 <1.75 2.50% 1.50% ========================================================== Except as set forth below, the Leverage Ratio used on any date to determine the Applicable Rate shall be that in effect at the fiscal quarter end next preceding the Financial Statement Delivery Date occurring on or most recently prior to such date; provided that at any time when any Financial Statement Delivery Date shall have occurred and the financial statements or the certificate required to have been delivered under Section 6.04(a), (b) or (c) by such date have not yet been delivered, the Applicable Rate shall be determined by reference to Category 1 in the applicable Table. Notwithstanding the foregoing, until the Financial Statement Delivery Date immediately following June 30, 2000, the Applicable Rate will for all purposes be determined by reference to Category 3 in the applicable Table. (c) The definition of "Net Debt" in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "Net Debt" shall mean, with respect to UCAR, Global, the Borrower and the Subsidiaries on a consolidated basis, at any time, (a) Total Debt at such time minus (b) the aggregate amount held at such time by UCAR, Global, the Borrower and the Subsidiary Loan Parties of (i) Permitted Investments of the type described in clauses (a), (b), (c), (e) and (to the extent analogous to such clauses (a), (b), (c) and (e)) (f) of the definition of Permitted Investments that are denominated in Euros (including Euro-equivalent currencies) or Dollars, mature 30 days or less from the date of determination and are held in jurisdictions from which funds may be freely transferred to the Borrower and (ii) cash denominated in Euros (including Euro-equivalent currencies) or Dollars that are held in jurisdictions from which funds may be freely transferred to the Borrower. (d) Section7.01(b) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (b) In the case of UCAR and Global, incur, create, assume or permit to exist any Indebtedness, except: (i) Indebtedness existing on the Effective Date and set forth on Schedule 7.01; -5- (ii) Indebtedness created under the Loan Documents; (iii) Indebtedness permitted by Section 7.01(a)(v); (iv) Indebtedness consisting of unsecured Guarantees of Indebtedness permitted by clauses (iii), (iv), (vii), (viii), (x), (xi) and (xii) of Section 7.01(a); (v) other unsecured Indebtedness in aggregate principal amount not to exceed at any time outstanding the unused amount of unsecured Indebtedness permitted to be incurred by the Subsidiaries by Section 7.01(a)(xii); and (vi) Indebtedness of UCAR consisting of contingent liabilities or Indebtedness of the type referred to in the proviso contained in the definition of "Unrestricted Subsidiary." In addition, UCAR may elect to receive any Restricted Payment permitted to be made to it under Section 7.06 by incurring intercompany Indebtedness to Global. (e) Section 7.05(h) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (h) sales or other dispositions of accounts receivable of Subsidiaries in connection with factoring arrangements so long as the aggregate face amount at any time outstanding of receivables subject to such arrangements does not exceed (i) $70,000,000 in the aggregate or (ii) $20,000,000 for receivables of Domestic Subsidiaries; (f) The word "and" at the end of Section 7.05(j) of the Credit Agreement is hereby deleted. The period at the end of Section 7.05(k) is hereby deleted and in lieu thereof a semicolon is inserted in its place. (g) A new Section 7.05(l) is hereby inserted immediately following Section 7.05(k) of the Credit Agreement and shall read in its entirety as follows: (l) sales of inventory pursuant to financing arrangements whereby inventory is sold to third parties at a discounted price coupled with the simultaneous formation of a contract to repurchase such inventory at a higher price on a date after such sale so long as the aggregate value of all inventory subject to such arrangements at any time does not exceed $30,000,000 in the aggregate; provided that the difference between the sale price and the repurchase price for each such disposition shall be reasonable in light of the period of time between the applicable sale and repurchase dates. (h) Section 7.06(b) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (b) Global may make any Restricted Payments to UCAR (A) in respect of overhead, tax liabilities, legal, accounting and other professional fees and expenses and any fees and expenses associated with registration statements filed with the Securities and Exchange Commission and ongoing public reporting requirements, in each case to the extent actually incurred by UCAR in connection with the business of maintaining its status as a public company or its ownership of the Capital Stock of Global, the Borrower and the Unrestricted Subsidiaries and (B) to distribute an intercompany note evidencing a loan Global made to UCAR in aggregate principal amount of $382,588,032.18 plus accumulated interest thereon; (i) Section 7.11 of the Credit Agreement is hereby amended by inserting the following proviso immediately following the table at the end of such Section: ; provided however, that for purposes of calculating the Interest Coverage Ratio to determine compliance with this Section for any four fiscal quarter period ending before July 1, 2001, (A) to the extent that any amount of the Amendment Fee is deducted from the consolidated net income of UCAR, Global, the Borrower and the Subsidiaries and is not added back in by the definition of EBITDA, such amount shall be added back in to EBITDA and (B) Cash Interest Expense shall not include any amounts attributable to the Amendment Fee. (j) Section 7.12 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: SECTION 7.12. Leverage Ratio. Permit the ratio (the "Leverage Ratio") of (a) Net Debt as of the last day of any fiscal quarter, which last day occurs in any period set forth below, to (b) EBITDA for the four quarter period ended as of such day to be in excess of the ratio set forth below for such period: ------------------------------------------------------------------- From and Including: To and Including: Ratio: ------------------------------------------------------------------- Effective Date September 30, 2000 4.25 : 1.00 ------------------------------------------------------------------- October 1, 2000 June 30, 2001 4.50 : 1.00 ------------------------------------------------------------------- July 1, 2001 September 30, 2001 4.00 : 1.00 ------------------------------------------------------------------- October 1, 2001 September 30, 2002 4.00 : 1.00 ------------------------------------------------------------------- ------------------------------------------------------------------- From and Including: To and Including: Ratio: ------------------------------------------------------------------- October 1, 2002 September 30, 2003 3.75 : 1.00 ------------------------------------------------------------------- October 1, 2003 September 30, 2004 3.75 : 1.00 ------------------------------------------------------------------- October 1, 2004 September 30, 2005 3.50 : 1.00 ------------------------------------------------------------------- October 1, 2005 September 30, 2006 3.50 : 1.00 ------------------------------------------------------------------- October 1, 2006 September 30, 2007 3.50 : 1.00 ------------------------------------------------------------------- October 1, 2007 Tranche B Maturity Date 3.50 : 1.00 ------------------------------------------------------------------- ; provided however, that for purposes of calculating the Leverage Ratio to determine compliance with this Section on any date prior to July 1, 2001, (A) Net Debt shall not include Indebtedness incurred to finance the payment of the Amendment Fee and (B) to the extent that any amount of the Amendment Fee is deducted from the consolidated net income of UCAR, Global, the Borrower and the Subsidiaries and is not added back in by the definition of EBITDA, such amount shall be added back in to EBITDA. SECTION 2. Conversion of Tranche A Loans. The Borrower shall have a one-time option to convert all or a portion of the Tranche A Term Loans denominated in Dollars outstanding on the Amendment Effective Date into Tranche A Term Loans denominated in Euros upon the last day of the Interest Period applicable to the Tranche A Term Loans as of the Amendment Effective Date. To exercise such option, the Borrower shall so notify the Administrative Agent not later than 12:00 noon, New York time, four Business Days before the last day of the Interest Period applicable to the Tranche A Term Loans, specifying the aggregate principal amount of all Tranche A Term Loans denominated in Dollars to be converted into Tranche A Term Loans denominated in Euros. The principal amount of each Tranche A Term Loan so converted shall be determined based upon the Exchange Rate in effect on the date that is four Business Days before the last day of the Interest Period applicable to such Tranche A Term Loan. The Borrower shall have no further option to convert Tranche A Term Loans between Dollars and Euros after it has exercised the option to convert Tranche A Term Loans pursuant to this Section 2 or if it fails to notify the Administrative Agent of its election to exercise its option pursuant to this Section 2 by the date and time specified above. SECTION 3. Representations and Warranties. Each of UCAR, Global and the Borrower represents and warrants to each Lender party hereto that, after giving effect to this Amendment, (a) the representations and warranties set forth in Article IV of the Credit Agreement are true and correct in all material respects on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties were true and correct in all material respects as of the earlier date), and (b) no Default or Event of Default has occurred and is continuing. SECTION 4. Effectiveness. This Amendment shall become effective as of the first date (the "Amendment Effective Date") that the following condition is satisfied: the Administrative Agent or its counsel shall have received counterparts of this Amendment that, when taken together, bear the signatures of the Borrower, UCAR, Global and the Required Lenders. Notwithstanding the foregoing, Section 2 of this Amendment shall not become effective unless the Administrative Agent shall have received counterparts of this Amendment that, when taken together, bear the signatures of Tranche A Term Lenders having Tranche A Term Loans representing at least 51% of the sum of all Tranche A Term Loans outstanding on the Amendment Effective Date. SECTION 5. Amendment Fee. The Borrower agrees to pay to each Lender that executes and delivers a copy of this Amendment to the Administrative Agent (or its counsel) on or prior to October 11, 2000 an amendment fee (the "Amendment Fee") in an amount equal to 0.25% of such Lender's Revolving Commitment (whether used or unused) and outstanding Term Loans , in each case as of the Amendment Effective Date; PROVIDED that the Borrower shall have no liability for any such amendment fee if this Amendment does not become effective. Such amendment fee shall be payable (i) on the Amendment Effective Date, to each Lender entitled to receive such fee as of the Amendment Effective Date and (ii) in the case of any Lender that becomes entitled to such fee after the Amendment Effective Date, within two Business Days after such Lender becomes entitled to such fee. SECTION 6. Effect of Amendment. Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders, the Issuing Bank, the Collateral Agent or the Administrative Agent, under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the Borrower to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances. SECTION 7. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but -8- all such counterparts together shall constitute but one and the same instrument. Delivery of any executed counterpart of a signature page of this Amendment by facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof. SECTION 8. Applicable Law. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 9. Headings. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written. UCAR INTERNATIONAL INC., by /S/NANCY M. FALLS ----------------------------- Name: Nancy M. Falls Title: Treasurer UCAR GLOBAL ENTERPRISES INC., by /S/NANCY M. FALLS ----------------------------- Name: Nancy M. Falls Title: Treasurer UCAR FINANCE INC., by /S/NANCY M. FALLS ----------------------------- Name: Nancy M. Falls Title: Treasurer MORGAN GUARANTEE TRUST COMPANY OF NEW YORK, as a Lender, as Administrative Agent, Collateral Agent and Issuing Bank, by /S/DEBORAH DESANTIS ------------------------------- Name: Deborah DeSantis Title: Vice President ABN AMRO BANK N.V., by /S/ DAVID A. MANDELL ------------------------------- Name: David A. Mandell Title: Senior Vice President by /S/ GEORGE DUGAN ------------------------------- Name: George Dugan Title: Group Vice President BANKERS TRUST COMPANY, by /S/ SCOTTYE D. LINDSEY ------------------------------- Name: Scottye D. Lindsey Title: Vice President BANK OF AMERICA, N.A., by /S/ EILEEN C. HIGGINS ------------------------------- Name: Eileen C. Higgins Title: Vice President THE BANK OF NEW YORK, by /S/ RONALD R. REEDY ------------------------------- Name: Ronald R. Reedy Title: Vice President THE BANK OF NOVA SCOTIA, by /S/ JOHN W. CAMPBELL ------------------------------- Name: John W. Campbell Title: Unit Head BANK POLSKA KASA OPIEKI S.A., NEW YORK BRANCH, by /S/ HUSSEIN B. EL-TAWIL ------------------------------- Name: Hussein B. El-Tawil Title: Vice President THE CHASE MANHATTAN BANK, by /S/ JAMES H. RAMAGE ------------------------------- Name: James H. Ramage Title: Managing Director CREDIT INDUSTRIEL ET COMMERCIAL, by /S/ DAVID WILSON ------------------------------- Name: David Wilson Title: Manager by /S/ CLIVE CARPENTER ------------------------------- Name: Clive Carpenter Title: Manager CREDIT LYONNAIS NEW YORK BRANCH, by /S/ ATTILA KOC ------------------------------- Name: Attila Koc Title: Senior Vice President CREDIT SUISSE FIRST BOSTON, by /S/ JOEL GLODOWSKI ------------------------------- Name: Joel Glodowski Title: Managing Director by /S/ LALITA ADVANI Name: Lalita Advani Title: Assistant Vice President FIRST UNION NATIONAL BANK, by /S/ ROBERT A. BROWN ------------------------------- Name: Robert A. Brown Title: Vice President FUJI BANK, LTD., by /S/ NOBUOKI KOIKE ------------------------------- Name: Nobuoki Koike Title: Vice President & Senior Team Leader THE INDUSTRIAL BANK OF JAPAN, LTD., by /S/ JOHN DIPPO ------------------------------- Name: John Dippo Title: Senior Vice President NATEXIS BANQUES POPULAIRES, by /S/ GARY KANIA Name: Gary Kania Title: Vice President by /S/ JORDAN SADLER ------------------------------- Name: Jordan Sadler Title: Assistant Vice President PNC BANK NATIONAL ASSOCIATION, by /S/ LOUIS K. MCLINDEN, JR. ------------------------------- Name: Louis K. McLinden, Jr. Title: Vice President TORONTO DOMINION (NEW YORK), INC., by /S/ DAVID G. PARKER ------------------------------- Name: David G. Parker Title: Vice President CIBC WORLD MARKETS PLC, by /S/ NEIL MCMILLAN ------------------------------- Name: Neil McMillan Title: Director NORTHWOODS CAPITAL II, LIMITED, By: Angelo, Gordon & Co., L.P., as Collateral Manager, by /S/ JOHN W. FRASER ------------------------------- Name: John W. Fraser Title: TRITON CDO IV, LIMITED, By: INVESCO Senior Secured Management, Inc., as Investment Advisor, by /S/ GREGORY STOECKLE ------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory AVALON CAPITAL LTD., By: INVESCO Senior Secured Management, Inc., as Portfolio Advisor, by /S/ GREGORY STOECKLE ------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory ARCHIMEDES FUNDING II, LTD., By: ING Capital Advisors LLC, as Collateral Manager by /S/ JONATHAN DAVID ------------------------------- Name: Jonathan David Title: Vice President ARCHIMEDES FUNDING III, LTD., By: ING Capital Advisors LLC, as Collateral Manager by /S/ JONATHAN DAVID ------------------------------- Name: Jonathan David Title: Vice President SEQUILS-ING I (HBDGM), LTD., By: ING Capital Advisors LLC, as Collateral Manager by /S/ JONATHAN DAVID ------------------------------- Name: Jonathan David Title: Vice President SWISS LIFE US RAINBOW LIMITED, By: ING Capital Advisors LLC, as Investment Manager by /S/ JONATHAN DAVID ------------------------------- Name: Jonathan David Title: Vice President GENERAL ELECTRIC CAPITAL CORPORATION, by /S/ GREGORY HONG ------------------------------- Name: Gregory Hong Title: Duly Authorized Signatory KZH CYPRESSTREE LLC, by /S/ KIMBERLY ROWE ------------------------------- Name: Kimberly Rowe Title: Authorized Agent KZH ING I LLC, by /S/ KIMBERLY ROWE ------------------------------- Name: Kimberly Rowe Title: Authorized Agent KZH ING 2 LLC, by /S/ KIMBERLY ROWE ------------------------------- Name: Kimberly Rowe Title: Authorized Agent KZH ING 3 LLC, by /S/ KIMBERLY ROWE ------------------------------- Name: Kimberly Rowe Title: Authorized Agent KZH LANGDALE LLC, by /S/ KIMBERLY ROWE ------------------------------- Name: Kimberly Rowe Title: Authorized Agent KZH RIVERSIDE LLC, by /S/ KIMBERLY ROWE ------------------------------- Name: Kimberly Rowe Title: Authorized Agent KZH SOLEIL 2 LLC, by /S/ KIMBERLY ROWE ------------------------------- Name: Kimberly Rowe Title: Authorized Agent ARES III CLO LTD., By: ARES CLO Management LLC Investment Manager, by /S/ SETH J. BRUFSKY ------------------------------- Name: Seth J. Brufsky Title: Vice President CITIBANK N.A. as Additional Investment Manager for and on behalf of FIVE FINANCE CORPORATION, by /S/ MARTIN DAVEY ------------------------------- Name: Martin Davey Title: Vice President by /S/ DANIEL SLOTKIN ------------------------------- Name: Daniel Slotkin Title: Vice President ALLSTATE LIFE INSURANCE COMPANY, by /S/ ROBERT B. BODETT ------------------------------- Name: Robert B. Bodett Title: Authorized Signatories by /S/ PATRICIA W. WILSON ------------------------------- Name: Patricia W. Wilson Title: Authorized Signatory MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, By: David L. Babson & Company Inc. as Investment Adviser, by /S/ MARY ANN MCCARTHY ------------------------------- Name: Mary Ann McCarthy Title: Managing Director MAPLEWOOD (CAYMAN) LIMITED, By: David L. Babson & Company Inc. under delegated authority from Massachusetts Mutual Life Insurance Company as Investment Manager, by /S/ MARY ANN MCCARTHY ------------------------------- Name: Mary Ann McCarthy Title: Managing Director SIMSBURY CLO, LIMITED, By: David L. Babson & Company Inc. under delegated authority from Massachusetts Mutual Life Insurance Company as Collateral Manager, by /S/ MARY ANN MCCARTHY ------------------------------- Name: Mary Ann McCarthy Title: Managing Director AMMC CDO I, LIMITED, By: American Money Management Corp. as Collateral Manager by /S/ DAVID P. MEYER ------------------------------- Name: David P. Meyer Title: Vice President CARLYLE HIGH YIELD PARTNERS II, LTD., by /S/ LINDA M. PACE ------------------------------- Name: Linda M. Pace Title: Vice President INDOSUEZ CAPITAL FUNDING IV, L.P., By: Indosuez Capital as Portfolio Advisor, by /S/ DAN A. SMITH ------------------------------- Name: Dan A. Smith Title: Managing Director BHF (USA) CAPITAL CORPORATION, by /S/ A. ALMONTE ------------------------------- Name: A. Almonte Title: Associate by /S/ D. MCDOUGALL ------------------------------- Name: D. Mcdougall Title: Vice President GALAXY CLO 1999-1, LTD., By: SAI Investment Adviser, Inc. it's Collateral Manager, by /S/ THOMAS G. BRANDT ------------------------------- Name: Thomas G. Brandt Title: Authorized Agent ATHENA CDO, LIMITED, By: Pacific Investment Management Company LLC, as its Investment Advisor, by /S/ MOHAN V. PHANSALKAR ------------------------------- Name: Mohan V. Phansalkar Title: Senior Vice President CAPTIVA III FINANCE LTD., as advised by Pacific Investment Management Company LLC, by /S/ DAVID DYER ------------------------------- Name: David Dyer Title: Director DELANO COMPANY, By: Pacific Investment Management Company LLC, as its Investment Advisor, by /S/ MOHAN V. PHANSALKAR ------------------------------- Name: Mohan V. Phansalkar Title: Senior Vice President MONUMENT CAPITAL LTD., as Assignee, By: Alliance Capital Management L.P., as Investment Manager, By: Alliance Capital Management Corporation, as General Partner, by /S/ SVERKER JOHANSSON ------------------------------- Name: Sverker Johansson Title: Vice President MUZINICH CASHFLOW CBO, LIMITED, by /S/ DANIEL NACCARELLA ------------------------------- Name: Daniel Naccarella Title: Attorney-In-Fact MOUNTAIN CAPITAL CLO II LTD., by /S/ DARREN P. RILEY ------------------------------- Name: Darren P. Riley Title: Director Sankaty Advisors, Inc. as Collateral Manager for BRANT POINT CBO 1999-1, LTD., as Term Lender, by /S/ DIANE J. EXTER ------------------------------- Name: Diane J. Exter Title: Executive Vice President, Porfolio Manager SANKATY HIGH YIELD PARTNERS II, L.P., by /S/ DIANE J. EXTER ------------------------------- Name: Diane J. Exter Title: Executive Vice President, Porfolio Manager Sankaty Advisors, Inc. as Collateral Manager for GREAT POINT CLO 1999-1, LTD., as Term Lender, by /S/ DIANE J. EXTER ------------------------------- Name: Diane J. Exter Title: Executive Vice President, Porfolio Manager PUTNAM MASTER INTERMEDIATE INCOME TRUST, by /S/ JOHN R. VERANI ------------------------------- Name: John R. Verani Title: Vice President PUTNAM PREMIER INCOME TRUST, by /S/ JOHN R. VERANI ------------------------------- Name: John R. Verani Title: Vice President PUTNAM VARIABLE TRUST-PVT DIVERSIFIED INCOME FUND, by /S/ JOHN R. VERANI ------------------------------- Name: John R. Verani Title: Vice President PUTNAM MASTER INCOME TRUST, by /S/ JOHN R. VERANI ------------------------------- Name: John R. Verani Title: Vice President OCTAGON INVESTMENT PARTNERS II, LLC, By: Octagon Credit Investors, LLC as sub-investment manager, by /S/ MICHAEL B. NECHAMKIN ------------------------------- Name: Michael B. Nechamkin Title: Portfolio Manager OCTAGON INVESTMENT PARTNERS III, LTD., By: Octagon Credit Investors, LLC as Portfolio Manager, by /S/ MICHAEL B. NECHAMKIN ------------------------------- Name: Michael B. Nechamkin Title: Portfolio Manager ELT LTD. by /S/ ANN E. MORRIS ------------------------------- Name: Ann E. Morris Title: Authorized Agent GLENEAGLES TRADING LLC, by /S/ ANN E. MORRIS ------------------------------- Name: Ann E. Morris Title: Asst. Vice President WINGED FOOT FUNDING TRUST, by /S/ ANN E. MORRIS ------------------------------- Name: Ann E. Morris Title: Authorized Agent PPM SPYGLASS FUNDING TRUST, by /S/ ANN E. MORRIS ------------------------------- Name: Ann E. Morris Title: Authorized Agent OLYMPIC FUNDING TRUST, SERIES 1999-1, by /S/ ANN E. MORRIS ------------------------------- Name: Ann E. Morris Title: Authorized Agent SAWGRASS TRADING LLC, by /S/ ANN E. MORRIS ------------------------------- Name: Ann E. Morris Title: Asst. Vice President KATONAH I, LTD., by /S/ MARC S. DIAGONALE ------------------------------- Name: Marc S. Diagonale Title: Treasurer, Katonah Capital LLC as Manager by: PPM America, Inc., as Attorney-in-fact,on behalf of JACKSON NATIONAL LIFE INSURANCE COMPANY, by /S/ MICHAEL J. HARRINGTON ------------------------------- Name: Michael J. Harrington Title: Vice President HARCH CLO I LTD., by /S/ MICHAEL E. LEWITT ------------------------------- Name: Michael E. Lewitt Title: Authorized Signatory ELF FUNDING TRUST I, By: Highland Capital Management, L.P. as Collateral Manager, by /S/ JAMES DONDERO, CFA, CPA ------------------------------- Name: James Dondero, CFA, CPA Title: President SENIOR DEBT PORTFOLIO, By: Boston Management and Research as Investment Advisor, by /S/ SCOTT H. PAGE ------------------------------- Name: Scott H. Page Title: Vice President EATON VANCE SENIOR INCOME TRUST, By: Eaton Vance Management as Investment Advisor, by /S/ PAYSON F. SWAFFIELD ------------------------------- Name: Payson F. Swaffield Title: Vice President EATON VANCE INSTITUTIONAL SENIOR LOAN FUND, By: Eaton Vance Management as Investment Advisor, by /S/ SCOTT H. PAGE ------------------------------- Name: Scott H. Page Title: Vice President OXFORD STRATEGIC INCOME FUND, By: Eaton Vance Management as Investment Advisor, by /S/ SCOTT H. PAGE ------------------------------- Name: Scott H. Page Title: Vice President EATON VANCE CDO III, LTD., By: Eaton Vance Management as Investment Advisor, by /S/ SCOTT H. PAGE ------------------------------- Name: Scott H. Page Title: Vice President MELLON FINANCIAL SERVICES, by /S/ ROBERT J. REICHENBACH ------------------------------- Name: Robert J. Reichenbach Title: AVP COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., by /S/ J. SHAW ------------------------------- Name: J. Shaw Title: Deputy Manager by /S/ SUE HEAD ------------------------------- Name: Sue Head Title: Deputy Manager KEMPER FLOATING RATE FUND, by /S/ KELLY D. BABSON ------------------------------- Name: Kelly D. Babson Title: Managing Director LIBERTY-STEIN ROE ADVISOR FLOATING RATE ADVANTAGE FUND By: Stein Roe & Farnham Incorporated, as Advisor, by /S/ JAMES R. FELLOWS ------------------------------- Name: James R. Fellows Title: Sr. Vice President & Portfolio Manager STEIN ROE & FARNHAM CLO I LTD., By: Stein Roe & Farnham Incorporated, as Portfolio Manager, by /S/ JAMES R. FELLOWS ------------------------------- Name: James R. Fellows Title: Sr. Vice President & Portfolio Manager STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY, by /S/ JAMES R. FELLOWS ------------------------------- Name: James R. Fellows Title: Sr. Vice President Stein Roe & Farnham Incorporated, as Advisor to the Stein Roe Floating Rate Limited Liability Company STANFIELD/RMF TRANSATLANTIC CDO LTD. By: Stanfield Capital Partners LLC as its Collateral Manager, by /S/ GREGORY L. SMITH ------------------------------- Name: Gregory L. Smith Title: Partner STANFIELD CLO LTD. By: Stanfield Capital Partners LLC as its Collateral Manager, by /S/ GREGORY L. SMITH ------------------------------- Name: Gregory L. Smith Title: Partner COLUMBUS LOAN FUNDING LTD., by /S/ JORDAN M. STITZER ------------------------------- Name: Jordan M. Stitzer Title: Vice President THE TRAVELERS INSURANCE COMPANY, by /S/ JORDAN M. STITZER ------------------------------- Name: Jordan M. Stitzer Title: Vice President TRAVELERS CORPORATE LOAN FUND INC., by /S/ JORDAN M. STITZER ------------------------------- Name: Jordan M. Stitzer Title: Vice President VAN KAMPEN CLO II, LIMITED BY: VAN KAMPEN MANAGEMENT INC., as Collateral Manager, by /S/ DARVIN D. PIERCE ------------------------------- Name: Darvin D. Pierce Title: Vice President VAN KAMPEN SENIOR FLOATING RATE FUND, By: Van Kampen Investment Advisory Corp. by /S/ DARVIN D. PIERCE ------------------------------- Name: Darvin D. Pierce Title: Vice President VAN KAMPEN PRIME RATE INCOME TRUST, By: Van Kampen Investment Advisory Corp. by /S/ DARVIN D. PIERCE ------------------------------- Name: Darvin D. Pierce Title: Vice President VAN KAMPEN SENIOR INCOME TRUST, By: Van Kampen Investment Advisory Corp. by /S/ DARVIN D. PIERCE ------------------------------- Name: Darvin D. Pierce Title: Vice President EX-27.1 3 0003.txt FINANCIAL DATA SCHEDULE - 3RD QUARTER
5 THIS SCHEDULE CONTAINS SUMMARY CONSOLIDATED FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF UCAR INTERNATIONAL INC. INCLUDED IN ITS QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 1,000,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 11 0 105 4 195 365 1,013 636 862 261 696 0 0 0 (313) 862 586 586 420 420 12 0 57 31 9 22 0 13 0 7 0.16 0.15
EX-27.1A 4 0004.txt RESTATED FINANCIAL DATA SCHEDULE - 2ND QUARTER
5 THIS SCHEDULE CONTAINS SUMMARY CONSOLIDATED FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF UCAR INTERNATIONAL INC. INCLUDED IN ITS QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2000, AMENDED TO SHOW YEAR-TO-DATE DATA INSTEAD OF QUARTERLY DATA IN THE APPROPRIATE LINE ITEMS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 1,000,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 11 0 125 4 205 398 1,061 671 898 245 718 0 0 0 (307) 898 394 394 281 281 10 0 39 18 4 14 0 13 0 0 0.00 0.00 (1) Amended for year-to-date versus quarterly.
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